Business Strategy through Frugal Innovation O.P Jagati, ACS, Vice President (Finance) & Company Secretary, Fowler Westrup (India) Pvt Ltd., Bangalore.
e-mail :
opjagati@rediffmail.com
Frugal innovation is about holistic rethinking of products and services offered to the customers and the underlying processes and business models so that companies can squeeze costs and expand the customer base, business and profits.
Any business strategy ultimately aims at more business and more profit for the undertaking. Cost control is a key element in any business strategy since in this era of cut throat competition, customers want better product/service at lesser price. It is commonly observed that whenever there is some pressure on the margin or the liquidity, the management tends to curb a few administrative overheads, like embargo on air travel, training programmes, business entertainment, curtailment in annual increment and incentive to employees etc. This approach is more of reactive in nature and does not yield the desired result and at times proves to be counter-productive. Cost control measure should be proactive and it should aim at growth of business with better margin. In this context, frugal innovation is about holistic rethinking of products/services offered to the customers, the entire production/service processes and business models so that companies can squeeze costs and thus they can expand the customers base. Five major principles encompassing the frugal innovation have been identified, substantiated by a few fascinating and successful practices implemented by some leading business houses.
Principle 1 Product or service features should be conceptualized after assessing the realistic need or expectation of the target customer. At times expenses on features not wanted by the customer only escalate the price of the product or the service with adverse consequence. We may substantiate the principle with the Ginger Chain of Smart Business Hotels launched by Tatas. At present there is demand for around one and a half lakh rooms in budget hotels which are tagged usually two or three star
hotels. The actual availability would be around eighty thousands. Inspite of huge demand, most of the companies in hospitality sector fail to expand because of high capital and running cost. The land required for a standard budget hotel of 100 rooms capacity is around 2 to 3 acres. The average manpower need per room is 3. As published in the book entitled Innovation and Innovativeness – the Tata Experience, Tatas felt that there is enough scope to stop the services which are normally not availed or expected by customers in a budget hotel. In Ginger Hotels, there is no provision of room service, bell boy and valet service. There is also change in the set up by putting room AC in lieu of central AC, standard conference room as per realistic requirement, single quality restaurant with standard menu instead of multiple cuisines restaurants. The customer has to carry his or her luggage by self serviced trolley like at airport, do the check-in at the kiosk installed at the entrance. Consequently, Ginger Hotel could be established in an area of 40,000 sq feet. Above measures could further reduce the man power for running the hotel from normal norm of 3 per room to 1 per 3 rooms. The capital cost of setting up a Ginger Hotel with necessary furnishing got reduced from Rs 25 lakhs to Rs 10 lakhs. Huge reduction in both capital and running cost could enable Ginger Hotels to reduce the room tariff to almost 1/3rd of that charged by normal budget hotels.
Principle 2 Business frugality is possible by realistic assessment and application of supply chain management. We may illustrate it with the help of learning from Wal-Mart – the largest retail chain in the world. Sam Walton, the founder,
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preferred to set up the retail chain in the small towns of USA. Efforts were made to source the products for sale from the nearby region and at same time catering to the need of the neighborhood customers. Purchase cost was low since no intermediary agent was involved coupled with logistic convenience in terms of time and cost. The supply lead time could be reduced which in turn reduced the inventory. Administrative cost of running the shops at smaller towns was low in comparison to mega cities. More focus was given on product variety than the design and ambience of the shops, which was compensated by greeting the shoppers personally on arrival. The cost saved due to above measures was passed on partially to the customers in form of attractive discount. Consequently, Wal-Mart product prices were absolutely lowest. Sale went up significantly so also the profit. In course of time, Wal-Mart has been able to make its presence through more than 8,500 stores in 15 countries with 55 different names and the success story is unstoppable.
Principle 3 Growth of a business depends to a large extent on its promotional activities which need to be effective and not simply costly. Companies conventionally tend to go for agency commission or advertisements in print and visual media,which are certainly costly but without any guarantee of success. However, it is possible to introduce some cost effective but highly innovative business campaign if the ground realities are analysed minutely. The novel sales promotional programme initiated by Mahindra & Mahindra (M&M) is a classic example. Now a days there is huge migration of rural labour to cities for better earning. Scarcity of labour has escalated the wages which in turn has made agriculture no more a gainful occupation. Further, Indian rural women do not carry out bullock driven ploughing activity either by social convention or physical compulsion. M&M in order to drive its tractor business in a rough weather, decided to teach tractor driving to rural women free of cost followed by issue of driving licence. Headmen of select villages were given the assignment to convince and mobilise women for such training. The programme initially started in Tamil Nadu gradually introduced in other agrarian states like UP, MP, Bihar, Kerala etc. The result was amazing. Women folk soon started enjoying the new learning and began to plough the land, left barren hitherto. To make the programme more effective, M&M introduced various agriequipments, like rice transplanter to save women from hours of back bending work, planting sapling by hand etc. The training programme subsequently included a crash course on soil testing and nursery development. More importantly, the mechanised farming enhanced the dignity of agriculture labour. The end result was new market development of M&M’s tractor business which could not have been possible by traditional sales promotional measures.
Principle 4 It is worth exploring the possibility of sharing the infrastructure facilities with other companies, even with the competitors without jeopardizing the business prospect. Time has come when we should give up the idea that entire business set up should be kept confidential from the attention of competitors. At times, it is worth sharing the high cost infrastructure facility with others on rental or similar basis. We may cite the example from telecom industry. Mobile telecom service providers have a challenge to expand subscribers base so that they could provide the service at a low cost. However, they have a daunting task to spend huge money on setting up mobile towers since the growth in subscribers base is directly proportional to the number of towers. In recent years, some telecom companies have started sharing the towers on rental basis which has saved substantial capital expenditure. At the same time, it is giving financial relief to the owner of the tower by earning rental from other users. Sharing of ATMs by a group of banks is another example. In a CII organized seminar, it was told by the eminent speaker who is an IIM Professor that two Gujarat based companies, one in the business of detergents and the other one in manufacture of synthetic overhead water tank, in early part of their business decided to have common transportation arrangement. In fact, it was quite fascinating and innovative.Detergents packets were kept inside the hallow water tanks and then loaded on the lorry. Both the companies could reduce the freight cost substantially and become more competitive. It may be a costly proposition for a SME unit to install ERP package in terms of cost and skilled man power. However, the concept of cloud computing by some software companies now can offer same service with much lower cost and manpower requirement, since the service provider would process and save the data in its domain server. The SME unit has to just enter the basic data.
Principle 5 Companies should always make efforts to apply new technologies for their operation which may not be costly in procuring, but certainly effective in delivering remarkable result. A few months ago, an interesting news was published in the Economic Times about application of RFID (Radio Frequency Identification) in dairy firms. RFID is a tiny microchip which is placed on the body of the cattle, preferably on the ear. It stores vital information about the dietary need, feeding and other related matters about cows and buffaloes, and transmits the same by a radio antenna via some wireless protocols, like, bluetooth, to designate computer for the necessary analysis and corrective steps. The overall cost for having such RFID system is affordable by a dairy farm. The cost of BG Chitale Dairy in Sangli in Maharastra, the pioneer in application of
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such technology has already reaped the benefits. While the national milk yield is around 1,000 litres per lactation, Chitale Farm is producing around 2,500 litres during similar cycle. Increased revenue has been possible by right action in right time, thus avoiding redundant expenses. Many Indian companies like top retailers, Pentaloon, Shoppers Stop and even auto giant Maruti Suzuki have adopted this technology for sound supply chain management as well as capturing customer data. Another example could be Vertical Storage System by which factories are able to generate additional shopfloor space for production by storing inventory in lesser space by vertical racks. This arrangement can also be linked to software program, which would facilitate material handling system, thus enhancing the productivity.
CONCLUSION Any cost control measure should be examined in context of its impact on the business of the company and its margin.
Innovative thinking can work wonder, rather than spoon fed conventional measures. Professional managers should think beyond their normal functional area. Thought process should be innovative and tuned in line with the business prospects and challenges of both the company and the industry as well as the expectation of the society. The development of hand held electrocardiogram (ECG) called the Mac 400 by GE’s health care laboratory in Bangalore with a price tag of around Rs. 36,000 against conventional ECGprice of approximately Rs. 9 lacs is a classic example of contribution of frugal innovation which besides accelerating the growth of business and profit of the company, certainly aims at meeting the expectation of the society in a country like India, where millions of poor people are still struggling to afford the costly medical treatment.Frugal innovation can be on any planks of the business- product(or service),process, procurement and promotion(marketing).It need not be only technology based. It could be strategic collaboration too.
ATTENTION MEMBERS
PMQ COURSE IN CORPORATE GOVERNANCE EXAMINATION DECEMBER, 2011 1. The Institute is pleased to announce that the Part-I next examination of the Post Membership Qualification (PMQ) in ‘Corporate Governance’ will be held from Thursday, December 29 , 2011 to Monday January 2, 2012 at the centres where the Company Secretaries December, 2011 examination would be held. TIME TABLE & PROGRAMME Date and Day Morning Session 09.30 A.M to 12.30 P.M Thursday Paper I Dec. 29, 2011 Conceptual Framework of Corporate Governance Friday Group I Paper II Dec. 30, 2011 Corporate and Board Management Saturday Paper III Dec. 31, 2011 Legal and Regulatory Framework of Corporate Governance Sunday Paper IV Jan. 1, 2012 Group II Board Committees and Role of Professionals Monday Paper V Jan. 2, 2012 Corporate Governance - Codes and Practices 2. Members of the Institute registered for the PMQ Course in Corporate Governance on or before May 31, 2011 are eligible for appearing in the PMQ Course in Corporate Governance Examination to be held in December, 2011 3. The last date for receipt of application forms (available in prospectus) for December, 2011 examination from eligible candidates together with requisite examination fee @ Rs.1500/- per group by way of cash/crossed Demand Draft favouring “The Institute of Company Secretaries of India” payable at New Delhi, is 15th November, 2011. Examination forms complete in all respect along with fee mentioned above and with the late fee of Rs.100/- should reach the Institute on or before 30th November, 2011. 4. For further details please contact Ms. Banu Dandona, Asst. Director (Academics) at the Institute Head Quarters at New Delhi.
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The New Age Agreements – Click Wrap Agreements Stuti Bansal, Associate at Corporate Professionals, Advocates and Solicitors, New Delhi.
e-mail : stuti111@gmail.com
An offshoot of e-commerce is the emergence of ‘click wrap’ agreements whereby agreements are entered into by a mere click in the computer. However, there are several problems relating to click wrap agreements. Some of these are discussed herein.
Since the last decade, there has been a tremendous technology revolution. Internet and transactions over the internet have become the sine qua non of everyday transactions throughout the world. This is because of the emergence of information technology based economy. The advent of Internet has changed the mode of entering into an agreement but the essentials of a valid contract are one and the same. In India the rules relating to formation of contracts, its validity and enforcement are regulated by Indian Contract Act 1872. However, there still remain some dark areas in the interpretation of these contracts for which a consolidated law governing e- contracts is required. E-commerce, an important result of information technology revolution, is the purchasing, selling, and exchanging of goods and services over computer networks (such as the Internet) through which transactions or terms of sale are performed electronically. This article examines some of the issues involved in the enforcing of click wrap license agreements in India.
MEANING Click Wrap Agreements are a natural development in today’s e-commerce world from “Shrink Wrap Agreements”. Shrink Wrap Agreements derived their name from the “Shrink –Wrap” packaging, that generally contains CD ROM of software. This type of contract is in the nature of prior license agreement enforced upon buyer when he buys the software in the form of a CD (compact disc). As soon as the buyer tears the cover or the wrap, it is deemed that the buyer has agreed to the terms and conditions to use the software and therefore, a contract is said to have been formed. In a Click Wrap Agreement, the party after going through the terms and
conditions provided in the website or programme has to typically indicate his assent by clicking “I Agree/I Accept” icon or decline the same by clicking the icon “I disagree”. These types of contracts are extensively used on Internet for granting permission to access the site or downloading the software or selling some product. Software Developers generally rely on the use of contracts in the form of clickwrap license agreements as a means to protect software from unauthorized use, modification and copying. By granting a license to the purchaser to use the software rather than selling the program outright, the Software Developer is able to retain and have control over his product. Most of click wrap license agreements are non-exclusive licenses which means that the licensor reserves the right to license the same software to other licensees. Click wrap agreements usually include provisions such as a ‘Notice of Agreement Clause’ stating that the using of the software/ product constitutes agreement to the license’s terms, a ‘Title Retention Clause’ which, in effect, states the user does not own the copy of the program he/she has contradicted for, but takes possession subject to a perpetual license, an ‘Exclusive Use Clause’, a clause preventing the user from creating unauthorized copies of the software/ product for use or otherwise, an ‘Anti-refuse Clause’ prohibiting the user from lending, renting, or transferring the software to others, in case of softwares, a clause prohibiting usage in more than one computer specified for that parties, an ‘Anti-reverse Engineering Clause’, prohibiting the user from reassembling the product from the already available version, a provision protecting the copyright over the software/ product design, a usual limitation or disclaimer of warranties and liabilities, a
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clause limiting the liability of the vendor, a purchaser’s right to decline the terms of the agreement by returning the software program or the product, as the case may be, and miscellaneous provisions such as a governing law clause, jurisdiction clause, force majeure clause etc. Thus, click wrap agreements are adhesion contracts which do not involve the concept of mutual assents and bargains as provided in the contract theory. Actually they are “take it or leave it” agreements in which the user is not made aware of the terms until late in the transaction (just before the use of the product) which is different from traditional written contract. The potential problem with click wrap agreements arises from the basic principles of contract law. These state that for a contract to exist there must be an offer of a contract, an acceptance of its terms and the parties to the contract must intend to be legally bound by the contract’s terms. Although ordinarily both the offer and acceptance take place during a period of discussion and/or negotiation and only after this process concludes do parties become bound by a contract on the basis that all terms are agreed. However, in the case of Click Wrap Agreements, the purchaser purchases the product and is then asked to agree to terms and conditions at a later stage, when there is no opportunity to negotiate such terms. And so the enforceability of click wrap agreements has been questioned and examined in many countries and jurisdictions. While India does not have a separate legislation governing econtracts (except for some limited provisions in the Information Technology Act, 2000), discussed herein is the position of some other countries in the world with respect to the enforceability of such contracts. The United States of America (US) seems to be ahead of the rest of the world in deciding their stance on such issues. The US being made up of separate states has no uniform legislation on the validity and enforceability of click-wrap agreements, but there are a number of cases that can be used as guidance and besides is the Uniform Information Computer Information Transaction Act (UCITA) which harmonizes the approach to click-wrap agreements to a great extent. In the arena of click-wrap agreements, the most famous US case was that of Hotmail v. Money Pie1 where the clicking of an ‘I agree’ button at the bottom of a terms and conditions page was considered sufficient. But some forms of click-wrap agreements have not been enforced. In European Union (EU), until recently the enforceability of click wrap agreements has been very unclear, while in Australia click-wrap are enforceable in principle. 1. Hotmail Corp. v. Van$ Money Pie Inc. ( No. C-98 JW PVT ENE, C 9820064 JW, 1998 WL 388389 (N.D. Cal., 1998)
ISSUES INVOLVED IN ENFORCING CLICK WRAP AGREEMENTS In click wrap agreements, the meeting amongst the parties is virtual i.e. they do not meet physically. The contract could be for the sale of any kind of product, physical or otherwise. Following are some of the issues that arise due to click wrap contracting:-
Identity of parties In click wrap agreements, the parties are not able to meet and negotiate the terms of the contract. Due to this and the contract being in standard form, the identity of the parties is unknown unlike in traditional meetings where individual or the company, as the case may be, negotiate the terms face to face. Hence, such transactions do not give the same sense of security. Online, the business transaction is entered into with what is generally in the nature of a faceless icon. Moreover, a due diligence exercise undertaken to verify the identity of the opposite party and to ascertain whether the latter is competent and capable of performing the contract becomes cumbersome. Also relevant is the fact that in case due diligence is conducted, the whole point of entering into this type of agreement due to its time saving ability will be defeated. The element of trust in online transactions (click wrap agreements) is a crucial one. Parties enter into the contract in good faith only. In normal goods for money transactions, the aggrieved knows the other party who is to be sued in case of default. However, in such transactions since the identity of the defaulter, if it is the person agreeing to the terms of the contract, is unknown, it is difficult to track and sue the person. Also, there exists the possibility of a fraudulent website exhibiting wares for sale, which accepts funds for delivery of goods but disappears later. The vendor’s identity is not known except through an impermanent and usually untraceable electronic link. In the light of these problems, it becomes imperative for the parties to a contract to be capable of being identified and their identity be guaranteed by a reliable entity.
Jurisdiction Due to the nature of the Internet it becomes hard to discern the point and place of offer, acceptance and performance of the contract. Since legal issues of jurisdiction are dependent on such factors, it is imperative to know about them. Moreover, the laws of contract governing the transaction may have certain variations in cases where an international element is present in the transaction, like the procedural formalities etc. may be different in separate jurisdictions. Therefore, the seat of the dispute is of great consequence to the outcome of the case.
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Legal recognition of transaction Further, even if the identity of the parties involved in the transactions is ascertainable, will the legal enforcement machinery of the State recognize such a transaction carried out on the internet? The evidentiary value of such transactions is not clear as of now. Thus, if an agreement is concluded in the form of a click wrap license, the admissibility of such document is disputable. Such an issue raises questions such as the reliability of such evidence vis-a-vis the amenability of such evidence to tampering.
Notice Notice is one of the important points considered by courts in deciding the enforceability of such contracts in the USA. Courts have held that click wrap agreements are enforceable if there are terms and conditions presented to the user to provide the user with requisite notice. For example, the Second Circuit Court in Specht v. Netscape2, found that a click-wrap license was unenforceable because to view the terms of the license agreement, the user was required to scroll to the bottom of the webpage. The court reasoned, “plaintiffs may have been aware that an unexplored portion of the Netscape webpage remained below the download button does not mean that they reasonably should have concluded that this portion contained a notice of license terms.” The court concluded that where a user was “urged to download free software at the immediate click of a button, a reference to the existence of license terms on a submerged screen is not sufficient to place consumers on inquiry or constructive notice of those terms.”
No Meeting of Minds The Indian Contract Act, 1872 provides that two or more persons are said to consent when they agree upon the same thing in the same sense3. This meeting of minds is however absent in the case of click wrap agreements in that since these contracts are contracts of adhesion, they are mostly one sided. Due to the complicated legalese and the lengthy details in such agreements, the user generally does not read the terms mentioned in them and assents to them without any meeting of minds. This is however dangerous because sometimes the users often give permission to share the user’s data with the free online service’s partners. These partners are often advertisers and marketers who collect data on users to build customer profiles from the information they receive from the online services through either web cookies or information that user post freely to their user profiles. The partners and advertisers use the
customer profiles they created to target users with customized advertisements reflective of the needs and wants of the particular user.
JUDICIAL PRECEDENTS India does not have any judicial history on the enforceability of click wrap agreements though the Information Technology Act, 2000 contains some provisions about electronic records, their attribution, acknowledgment and despatch. However, in the absence of any clear law on the subject, the only next best option is to look at some foreign decisions on the subject. There are a few cases relevant to the validity of click wrap license agreements decided by courts in USA. Compuserve v. Patterson4 is a case relating to a non mass-market click wrap license agreement. Compuserve, the plaintiff, was a computer information service headquartered in Columbus, Ohio. It contracted with individual subscribers, such as Patterson, the defendant, to provide access to computing and information services via the Internet. Patterson was a resident of Houston, Texas subscribed to Compuserve and he also placed items of ‘shareware’ on the Compuserve system for others to use and purchase. Patterson entered into a ‘Shareware Registration Agreement’ (SRA) with Compuserve. Under the SRA, an online agreement, Compuserve was entitled to a percentage of the fee when a user paid a shareware licensing fee. After that Compuserve would pass the remainder to the shareware’s creator. The SRA also referred two documents which are the CompuServe Service Agreement (Service Agreement) and the Rules of Operation. Both of them expressly provide the agreements would be governed and construed by Ohio law. Later, Compuserve began to market a similar product by using software that infringed the Patterson’s trademark used in his shareware program. When Patterson complained, Compuserve sought from an Ohio court a declaratory judgment that it was not infringing on any of the Patterson’s trademark. The appellate court held Patterson’s contacts with Ohio were sufficient for the Ohio court to exercise personal jurisdiction over the non-residence. The court also reasoned Patterson manifested assent to the SRA, which by its terms was to be governed by Ohio law, by typing ‘Agree’ at various points in the agreement. Therefore, a contract formed in the form of click wrap was held enforceable. The first case to consider the enforceability of a mass-market click wrap agreements was Hotmail v. Van $ Money Pie5. Hotmail, the plaintiff, is a Silicon Valley company that provides free electronic mail (e-mail) on the World Wide Web.
2. No. 01-7860 (L) (2d Cir., October 1, 2002)
4. 89 F.3d 1257 (6th. Cir.1998)
3. Section 13, Indian Contract Act, 1872
5. 1998 WL 388389, 47 U.S.P.Q.2d. 1020. (N.D.Cal. 1998)
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Hotmail’s online services allow its over ten million registered subscribers to exchange e-mail messages over the Internet with any other e-mail users who has an Internet e-mail address throughout the world. To become a Hotmail subscriber, one must agree to abide by the Service Agreement (Terms of Service) which specifically prohibits subscribers from using Hotmail’s services to send unsolicited commercial bulk e-mail or “spam” or, to send obscene or pornographic messages. Hotmail can terminate the account of any Hotmail subscriber who violates the Terms of Service.
Don’t Agree” at any point while scrolling through the agreement. Registration may proceed only after the potential subscriber has had the opportunity to view and has assented to the membership agreement, including MSN’s forum selection clause. No charges are incurred until after the membership agreement review is completed and a subscriber has clicked on “I Agree.” The Superior Court, Appellate Division, by affirming the trial court’s decision, held the application of MSN’s forum selection clause at Washington did not contravene public policy and would not inconvenience a trial.
In the fall of 1997, Hotmail found out that Van$Money Pie Inc., the defendant, created Hotmail’s accounts to facilitate sending “spam” e-mails to thousands of internet e-mail users including Hotmail’s domain name and its mark. The spam messages advertised pornography, bulk e-mailing software, and “get-rich-quick” schemes. The Hotmail’s account served as a drop box for collecting unopened responses to the spam messages and receiving bounced back e-mails sent to nonexistent or incorrect email addresses. Hotmail, after receiving complaints from Hotmail’s subscribers, sued the defendant claiming the defendant had breached the terms of service Agreement by arguing the defendant had agreed to abide by the terms of the Service Agreement before obtaining Hotmail account and using Hotmail’s email services. Moreover Hotmail also claimed the defendant’s actions damaged Hotmail’s reputation and goodwill. The US District Court granted Hotmail an injunction prohibiting the defendant from “Spamming” via Hotmail’s email services.
Another court was more explicit in its reasoning relating to the validity of click wrap agreements. In i.LAN Systems, Inc. v. Netscout Service Legal Corp.7, a Federal District court upheld a click wrap contract. In this case, i.LAN provided a network monitoring service to customers and purchased software from Netscout. Netscout and i.LAN signed an agreement allowing i.LAN to resell Netscout’s software to customers. However, i.LAN wanted to rent the software to customers. This was a practice Netscout claimed was not allowed under the click wrap license contained in the software itself. In reaching its decision, the court focused on whether click wrap licenses as a rule were enforceable. The court held that they were and that by clicking on “I agree,” i.LAN had overtly consented to the terms. This explicit assent was the key to the court’s determination that the click wrap agreement was not invalidated by the earlier purchase order agreement between the parties.
From this case, even though the court did not directly address the validity of this online agreement, the judgment implied the validity of click wrap license agreement which is a good sign for the electronic commerce community. Another case relating to click wrap contracts is Caspi v. The Microsoft Network,LL.C. et al6. This case was a class action. Subscribers to on-line computer service, the plaintiff, brought action against the Microsoft Network (MSN), an Internet service provider (ISP) and the defendant, to recover for the way it rolled over service into more expensive plans. The issue of the case is whether a forum selection clause contained in an on-line subscriber agreement is enforceable. From the fact, before becoming an MSN member, a prospective subscriber is prompted by MSN software to view multiple computer screens of information, including a membership agreement which contains the above clause. MSN’s membership agreement appears on the computer screen in a scrollable window next to blocks providing the choices “I Agree” and “I Don’t Agree.” Prospective members assent to the terms of the agreement by clicking on “I Agree” using a computer mouse. Prospective members have the option to click “I Agree” or “I 6. 323 N.J. Super 118 ; 732 A.2d 528 (1999)
CONCLUSION There is no simple or easy way to fix the problem of parties to such contracts who cannot trust the online or invisible vendor. The parties are often unsure or unaware of what they are consenting to when entering into click wrap agreements. Arguably, if two parties enter into a contractual agreement in which there is no meeting of the minds, then the contract should be rendered unenforceable. But the fact is that parties enter into numerous such contracts everyday without truly understanding what they are consenting to, without a meeting of the minds and without realizing the possible implications. For example, most sites providing free e-mail services often use the private information of the user in return. The anonymity of the user is the bargaining price in such cases. However, with the coming age, technology has crippled parties, leaving them with no option but to enter into such contracts unconditionally. The only thing parties can really do now is to ensure a good faith contractual relationship and wait for some regulation or guidelines to regulate click wrap agreements. 7. 183 F. Supp. 2d 328 (D. Mass. 2002)
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Thin Capitalisation S.Natarajan, FCS, Company Secretary, Coimbatore.
e-mail : natarajan20@gmail.com
Debts as against equity offer significant tax advantages to the borrower company resulting in loss of revenue to the exchequer. The revenue avoided is restored by restructuring ‘debt’ in to ‘thin capital’ and ‘debt’. Such capital restructuring is recognised in many countries only for the purposes of preventing tax avoidance.
Introduction A company is said to be thinly capitalized when a greater proportion of its ‘capital-structure’ is made up of ‘debt’ than of ‘equity’. This will pose problems to two sets of people.
Creditors and lenders may have to face solvency risk, if the company is unable to repay its debt over a time period as the enterprise is saddled with ‘debt’ burden; and Tax authorities, may be concerned about the intentional ‘debt-abuse’ by interested parties and the resultant taxavoidance.
The latter of the above is the major concern of the exchequer as it will lead to tax-avoidance, if left uncontrolled. Tax avoidance, by adopting a policy of ‘thin capitalization’, is the result of intentional abuse of ‘debt capital’. To prevent such abuse separate rules had to be introduced in many countries. These rules are known as ‘thin capitalization rules’. Thus the concept of ‘thin capital’ has first found its way into the taxstatutes with the specific object of preventing tax avoidance. But, since the concept stands in the way of free flow of investment, many other countries have not yet recognized it. India is one among them. Indian Tax Legislation does not have separate rules for ‘thin capital’-neither does it directly recognize the concept. Of late, the Government of India is seriously considering steps to prevent ‘all arrangements’ to avoid tax. The change proposed in General Anti Avoidance Rules (GAAR) is a step in that direction. The Direct Taxes Code (DTC) intends to widen the scope of the said GAAR so as to include in its purview all
arrangements which aim to avoid tax with out violating the express provisions of the Code. ‘Thin Capitalization’ is considered as one such arrangement to avoid tax and hence may come under the purview of GAAR. It is in this context that the awareness of the concept gains importance.
The Concept A normal 'Capital Structure’ of a company is generally composed of ‘equity capital’ and ‘debt capital’. (Equity, in this Article, refers to funds raised through the issue of all forms of dividend-yielding securities). ‘Debts’, as against ‘equity’, offer significant tax advantages to the borrower company and enable tax-avoidance resulting in loss of revenue to the exchequer. The interest payments generated on ‘debt capital’ is treated as a finance charge, and is allowable as a deduction in the taxable corporate income, thereby reducing the corporate tax burden. On the contrary the dividend distribution on equity capital is on after-tax profits of enterprises, and if there is no profit dividend is not payable. In such situation, if a part of the investment from a shareholder, that has to be in the form of ‘equity’, is made in the form of ‘debt’, then the intention may be to keep the equity disguised as ‘debt’ to gain certain advantages. The advantages of this sort of structuring are:
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helps the company enabling tax-avoidance while ‘equity’ helps the exchequer by increasing the revenue. Thus more the investment in ‘debt’, more is the tax-benefit to the investee company; and more is the loss of revenue to the exchequer. 2. It may also be noted that the disallowance of interest may not reduce the interest income of the creditor and he may have to pay tax on it by including it in his taxable income as interest income. Status-quo is maintained for the income in the hands of the creditor. No tax avoidanceno tax savings. 3. Further, as indicated, if there is no profit, dividend on ‘equity’ is not payable, whereas interest is payable on ‘debt’ even if there is no profit. More the investment in ‘debt’, more is the certainty of income to the lender. 4. Rate of interest on ‘debt’ is more flexible and can be increased in tight money market conditions to the advantage of the lender (investor). To take on all the above advantages, shareholders holding controlling interest artificially reduce the proportion of ‘equitycapital’, and increase the proportion of ‘debt-capital’. This will result in loss of revenue to the government, as it will lead to increased interest expense, reduced taxable income, and achieve the purpose of tax avoidance. However, to plug the loophole, Tax-authorities in several countries treat ‘debts’ accepted beyond certain limits from controlling shareholders as ‘veiled-capital’ and term it as ‘thin capital’(also known as ‘hidden capital’) to distinguish it from normal loans. Interest paid on that part of the debt which is rechristened as ‘thin capital’ will be treated as ‘dividend’ paid. Dividend, being expenditure disallowed, this will be added back to the total income of the company and assessed to tax. This way, the revenue avoided is restored by restructuring ‘debt’ into ‘thin cap’ and ‘debt’. This sort of capital-structure is recognized only for the purpose of Tax Legislation.
‘Debt’ exceeding a certain limit, provided by shareholders and their related parties holding controlling-interest, is reclassified by tax authorities as ‘thin cap’ under certain circumstances. The limit is set normally by fixing a ceiling on the debt proportion that will qualify for tax deduction, on funds that are infused into a company, by the controllingshareholders. In other words, excess ‘debt’ pumped in by the shareholders holding controlling-interest, over and above a fixed proportion of his equity will not qualify as ‘debt’. The ‘excess’ ‘debt’ will be reclassified as ‘thin capital’. As a result excessive deduction of interest will not be allowed. There are two deeming provisions under the concept. (i) A portion of controlling shareholders’ loan is deemed as ‘thin cap’. This reclassification in the capital structure is otherwise not adopted into the books of the company. (ii) As a consequence of the above reclassification, the portion of ‘interest’ paid on ‘thin cap’ is deemed as ‘dividend’, even though it is treated as interest in account books.
‘Debt’ taken from ‘controlling-shareholder’ only is reclassified It is pertinent to note that ‘debts’ accepted beyond certain limits, from shareholders holding ‘controlling interest’, is treated as capital and termed ‘thin cap’. Debts provided by third parties and financial institutions do not come under the purview of ‘thin capital’. The concept of ‘control’ is normally defined under ‘thin cap’ rules so as to enable the tax authorities of the country to ascertain whether the particular investor is in a position to influence the capital structure of the company by investing both in ‘equity’ and ‘debt’. Tax-statutes of many countries provide for two different layers of shareholding-pattern, based on the domicile of the investor, to identify ‘controlling shareholder’ as given below:
Thus the capital structure is redefined under the above said arrangement by tax-authorities so as to comprise three items viz; (i )Equity ‘Capital’, (ii)’Thin-Capital’ (‘thin-cap’) and(iii)‘Debts’. ‘Debts’ herein is split into ‘Debts’ and ‘thin capital’. This sort of capital restructuring is done only under certain circumstances by tax authorities of countries where they have separate rules for ‘thin cap’. In India the concept is yet to get a ground.
When ‘Debt’ deemed as ‘Thin Cap’ Under the concept of ‘thin cap’ the ‘debt’ component of the capital structure is restructured and sub-divided into ‘debt’ and ‘thin capital’, in case a portion of the ‘debt’ falls under the scope of ‘thin capital’. 1541
1. The first layer relates to domestic investors who along with related parties hold ‘controlling-interest’ in the company, holding directly or indirectly, more than 50% shares of the Company. The investment made in the ‘debt capital’ by the domestic investors holding ‘majority control’ is subjected to scrutiny for ‘thin cap’ and interest paid on that portion of ‘debt’ which is ascertained as ‘thin cap’, if any, is treated as dividend paid, and taxed accordingly. 2. In some countries, the rule is extended to foreign investors known as ‘foreign controlling parties’, who do not hold ‘controlling interest’, but hold shares exceeding a certain percentage in the borrower company. For instance, Australia’s ‘thin capitalization’ regulations (A - 414) NOVEMBER 2011
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are made applicable to ‘foreign controlling parties’ (investors) who own directly or indirectly 15% or more of the equity, or the right to obtain, directly or indirectly, 15% or more of the distributable dividends, profits or capital of the company. The percentage may vary in other countries. The idea is that the said foreign controlling party may be able to so influence the company as to accept additional ‘debt’ capital at a higher rate of interest’ In short it is essential to note that the application of the concept of ‘thin cap’ is restricted to the funds of the controlling shareholder/s and their Group, domestic or foreign. The logic is simple. Only controlling shareholders can influence the capital-structure of a company. Minority shareholders may have no say. Quantum of the ‘debt-contribution’ to the enterprise, received from the controlling shareholder, compared to the quantum of the investment made in equity held by such shareholder will be very high so as to qualify the excess portion of the ‘debt’ as ‘thin capital’.
Conditions to reclassify a loan as ‘Thin Capital’ If a loan fulfils the following three conditions, the structuring may be classified so as to include ‘thin-capital’: 1. The lender (along with his group) has a controlling interest in the borrower company. ‘Thin cap’ situation arises only when the controlling shareholder invests both in share capital and loan capital. 2. Continuous use of the loan, by the borrower company, as though it is equity capital, without any pre-fixed repayment plans. 3. Ratio of the loan to the controlling shareholders’ equity is excessive against pre-fixed ratio under the laws (of Taxation) of the country. Borrowings not considered within the scope of thin capitalization. The following loans, even if they are through controlling shareholders, are not considered for the purpose of quantifying ‘thin cap’. 1. Loans received from third parties based on non-cash guarantees provided by shareholders holding controlling interest. 2. Loans obtained by controlling shareholders from banks and other financial institutions or from capital markets wholly or partially on-lent with the same conditions. As long as the loan between the enterprise and individual/s are real and legitimate, the loan will not come under the purview of ‘thin cap’. But the enterprise and the individual/s should
have entered into a legally binding loan contract to escape from the mischief of ‘thin -cap’ rule.
‘Thin Capital’ Differs from ‘High Gearing’ The concept of ‘High gearing’ refers to a situation where an entity has high proportion of debt as compared to equity. In order to be ‘highly-geared’ it has to be so geared at the overall company level – i.e. regardless of whether lending is from shareholders having controlling interest or not, the company itself is more leveraged than the prefixed ratio .‘Thin cap’, on the other hand, is in respect of the lending from particular ‘controlling-shareholder’/promoters in addition to high-gearing in the entity.
Choice between Debt and Equity Normally the choice between equity and debt is decided by the conditions in the capital market. If the capital market is on the downturn companies will find it difficult to raise equity finance. In such a situation it may not be possible for the company to go for Public Offer. The Promoter will have to arrange loan funds from related sources at least temporarily. As a consequence capitalization becomes ‘thin’. Later they may substitute it by raising loan from unrelated sources even if the cost is higher. On the contrary, the company would prefer ‘equity’ to ‘loan’ because interest cannot be postponed but dividend can be postponed. So, even when it is not easy to tap equity, companies will still go in for equity. Foreign investors prefer to invest in debt rather than in equity for the following reasons: viz (i) Easier repatriation of debt over equity. (ii) Pre-fixed Repayment Schedule (iii) Compulsory return on investment (iv)Simple formalities. There is nothing strange about the conflict between equity and debt. The promoter (the controlling shareholder) normally determines the capital structure by chance and not by choice. But tax authorities view it from revenue angle and treat a portion of the debt as ‘thin capital’. Tax incidence has not been a major consideration for Indian companies in deciding one or the other form of investment. Particularly they have not been used to thinning of capital as a ‘strategy’ to reduce their tax liability. That may be the reason why the concept of ‘thin cap’ is yet to find a place in Indian Tax Legislation.
How Tax-Authorities reclassify the Debt Even though, it is wholly a decision of the company to form capitalization portion of loan and equity, Tax authorities in different countries adopt different approaches to reclassify the
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loan amount as’ loan’ and ‘thin capital’. They reclassify some part of the loan as ‘thin capital’ and treat only the remaining part as ‘loan’, based on the rules of thin capitalization of the respective countries.
loan, or any amount in excess of the arm’s-length amount, must be seen as being designed to procure share in the profits. 5. No-Rules Approach: When there are no rules or guidancenote on the subject, the Taxation Authorities presume and take an arbitrary estimate based on measures to check tax-avoidance.
A wide variety of methods are used to deal with ‘thin capitalization’. Five main approaches are indicated hereunder: 1. Fixed Ratio Approach: It is also known as Debt/Equity Ratio Method. Under the ‘fixed ratio’ approach, if the debtor company’s total debt exceeds a certain proportion of its equity capital, the interest on the excess portion of the loan over the approved proportion is automatically disallowed and/or treated as a dividend, (subject to certain ‘safe harbor limits’). Most of the countries which use the ‘fixed-ratio approach’ usually have specific ‘thin capitalization’ legislation. This method is objective, transparent, simple and user-friendly. But it lacks flexibility. 2. Variable Ratio Approach: Under this method the ratio of Interest to PBT (Profit Before Tax) is used to measure the quantum of ‘thin capital’. But the resultant figure may vary from Industry to Industry, or from company to company in the same Industry, for the simple reason that the share of interest in profits can vary with the rate of interest or the rate of profit. 3. Subjective Approach: The basis of the ‘subjective’ approach is to look at the terms and nature of the capital contribution and the circumstances in which the financing has been made.This helps to decide the real nature of the contribution-whether it is debt or equity. For instance, when there is no repayment schedule, and/ or where the rate of interest is linked to profitability, the ‘debt’ will be treated as ‘equity’ (thin capital). The test of substance over form is applied in this case. The advantage of this approach is flexibility. The disadvantages of this approach are low-transparency and greater exercise of the discretion of tax authorities. Also, since it is difficult to find comparable data, it gives taxpayers a lot of uncertainty. Some countries using the subjective approach have specific legislation. Other countries use more general rules if these are available, such as general anti-avoidance legislation. 4. Hidden Profit Distribution Approach: There are also countries that apply ‘hidden profit distribution’ rules to reclassify interest as dividends. In some of these countries the hidden profit distribution rules are applied along with specific rules which limit the deduction of interest on loans from shareholders. The underlying idea is that if the loan exceeds what would have been lent in an arm’slength situation, the lender must be considered to have an interest in the profitability of the enterprise and the
‘Safe harbor rule’ under ’thin cap’ A safe harbor rule is a provision in a statute or a regulation that reduces or eliminates a party’s liability under the law, on the condition that the party performed its actions in good faith or in compliance with defined standards. It is a legal provision to eliminate liability as long as good faith is demonstrated. For instance, under Indian Penal Code, even murder committed in self defence is excused. ‘Self defence’ is a ‘safe harbor’ there. Indian Income Tax Act also provide for Safe Harbor Rule under section 92CB for matters covered under Chapter X of the Act. Thus, most statutes provide safe harbor rules. Under ‘thin cap’ regulations, Arm’s Length Principle (ALP) is the simple and common safe harbor rule that provides the type of action that can be taken by the taxpaying company to protect itself from the application of ‘thin cap’ regulations. This rule tries to help those companies which do not really intend to avoid tax but are forced, under certain circumstances, to adopt ‘thin capitalization’.
Arm’s length Principle(ALP): A common safe harbor A controlling shareholder, who had invested in the “debtcapital” of the taxpaying company, may enable the company to take shelter under ‘ALP-safe harbor’ if and when he does the following:
Ascertain how much the company would have been able to borrow from an independent lender; and
Compare this with the amounts actually borrowed from group companies or with the backing of group companies.
Consider whether the rate of interest is one which would have been obtained at arm’s length rate while comparing from an independent lender as a stand alone entity.
A comparison can then be made between the interest payable on the actual debt and that which would be payable on the amount which could have been borrowed at arm’s length. Some times the difference may be nil; in which case it can be established that the debt falls under ‘ALP shelter’. Deductions for corporation tax purposes can be limited to those on the latter amount. For ‘thin cap’ rules to apply to an off-shore lender, the loan needs to be from an offshore connected person. Under the
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rules to test if a company is thinly capitalized, it is necessary to:
Determine the amount the company would have been able to borrow from an independent lender, and
Compare this with the amounts actually borrowed from an offshore connected person.
A comparison can then be made between the interest payable on the actual debt and that which would have been paid under a third party arrangement, the allowable deduction being limited to the latter amount as the arm’s length amount.
Specific Approach for ‘thin cap’ to be stated Though ALP is a safe harbor rule applicable to all approaches to ‘thin cap’ additional rules have been developed for each approach to ‘thin cap’. For instance, under Fixed Ratio Approach (D/E approach ), the thin capitalization provisions shall not apply if the borrowing company can demonstrate that the overall debt-toequity ratio of its economic group is higher than its own debtto-equity ratio in respect of the fiscal year concerned. Thus, in order for the Target Company not to be treated as thinly capitalized; (a) either, the total debt of the company has to be within overall permitted ceiling even though the lending from the controlling shareholder is more leveraged than the limits set by the ratio; or (b) the lending from a particular Controlling Shareholder has to be less than the safe limit. If total debt is less than prefixed ceiling, then even if the debt from controlling shareholder is more than permitted ceiling, there will be no ‘thin cap’ as it is very much within safe harbor limits set by D/E ratio. This exception is essentially saying that, where a company is not thinly capitalized overall, it would not be treated as thinly capitalized with respect to a particular Controlling Shareholder even if lending from them exceeded the limits set. Thus under the D/E rule, the ratio sets safe harbor limits. This is an addition to the ALP safe harbor. Such specific rules further apply in tax consolidated groups. Thus, apart from the ALP safe haven, there are other protective limits which are based on the ‘approach’ adopted by the tax authorities. Similarly each approach to measure ‘thin cap’ provides an insight into the limits which cannot be overstepped. If the limits are broken, then the mischief of ‘thin cap’ rule becomes applicable and it will be a playfield for tax authorities. So, it is desirable to spell out the rules of the game clearly rather than leaving it to the discretion of tax authorities.
Position in India Chapter X of the Income Tax Act,1961 provides special provisions relating to Avoidance of Tax. But it does not recognize ‘thin cap’. Also the Act is silent on taxing deemed dividend in the place of interest paid to ‘thin capital’, even though it defines certain other dividends, under section 2(22), which are deemed as dividend. In other words the Act defines deemed dividend, but does not include interest on ‘thin cap’. The proposed GAAR, in whatever form it is introduced, may provide scope for the application of the concept of ‘thin cap’. But the proposed GAAR does not envisage that every arrangement for tax mitigation would be liable to be treated as a tax avoidance arrangement. The GAAR provisions will come into effect only if it is also covered by one of the following four conditions, viz; which is not normally employed for bona-fide business purposes or which is not at arm’s length prices or Which Abuses the provisions of the DTC or which lacks economic substance.
Conclusion Invoking GAAR alone may not help. We have to devise a more suitable mechanism to prevent intentional tax-avoidance. Any measure hastily taken may derail the inflow of investment. It would be ideal if, instead of relying upon the GAAR, clear rules are brought in with respect to ‘thin capitalization’ norms that are understandable to the taxpayer. However when there are no specific rules, tax-authorities may try to treat the entire portion of the loan from controlling shareholders’ as capital. It may be argued that if you can carry food in a train, why not do the same on planes. If interest on a ‘part’ of the loan can be disallowed, why not do the same on entire loan of the controlling shareholder. The answer may be from the new DTC. However the rule over-emphasizes revenue aspect causing serious concern to economic growth by preventing the free inflow of investment (both domestic and foreign). Our Government has to wisely balance between need and greed. The recognition of the concept of ‘thin capital’ does not give room for any new taxes; it may at best broaden the base of taxation. If at all it is decided to recognize the concept, it should be direct so as to enable our tax authorities to reclassify the capital structure without any ambiguity. Otherwise tax authorities may be forced to take an arbitrary decision on the quantum of ‘thin capital’. The Count-down has begun with DTC. The law on the subject will be launched sooner, than later. Corporate India should be well prepared to face any changes in the rules affecting capital structure.
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Fathoming FEMA {Overview of Provisions of Foreign Exchange Management Act, 1999 (FEMA) and Rules and Regulations there under} Rajkumar S Adukia, ACS, Mumbai.
e-mail : rajkumarfca@gmail.com
The complicated Foreign Exchange Regulation Act, 1973 has been repealed and replaced by a much simplified Foreign Exchange Management Act, 1999. The emphasis has been shifted from ‘regulation’ to ‘management’. This article provides an overview of the FEMA and the Rules and Regulations made thereunder.
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permitted. This resulted in increased flow of foreign exchange in India and foreign exchange reserves increased substantially.
The Parliament had enacted the Foreign Exchange Management Act, 1999 (FEMA) to replace the Foreign Exchange Regulation Act, 1973. FEMA came into force on the 1st day of June, 2000.
In 1997, the Tarapore Committee on Capital Account Convertibility (CAC), constituted by the Reserve Bank, had indicated the preconditions for Capital Account Convertibility. The three crucial preconditions were fiscal consolidation, a mandated inflation target and, strengthening of the financial system. The Tarapore Committee had also recommended change in the legislative framework governing foreign exchange transactions. A Bill based on the recommendations of the Task Force, was introduced in the Lok Sabha on 4 August, 98. The Bill was referred to the standing committee on Finance which submitted it’s report to the House on 23 December’98 with suggestion and modifications. The 12th Lok Sabha was dissolved before any decision could be taken on the bill. The Bill subsequently lapsed. The bill was again introduced in the 13th Lok Sabha on 25th Oct’99 and was passed in the winter session of Parliament in 1999. The Presidential Assent was received on 29th December, 1999. Finally FEMA came into operation w.e.f. 1st June 2000 vide G.S.R 371 (E), dated 1st May, 2000.
HISTORICAL BACKGROUND INTRODUCTION OF FEMA
Exchange Control in India dates back to 1939 when for the first time it was introduced as a war measure under the Defense of India Rules. During the World War II September 1939, there was a shortage of foreign exchange resources. A system of exchange control was first time introduced through a series of rules under the Defense of India Act, 1939 on temporary basis. The foreign crisis persisted for a long time and finally it got enacted in the statute under the title “Foreign Exchange Regulation Act, 1947.” This was meant to last for 10 years. However, 10 years of economic development did not ease the foreign exchange constraint, it only made things worse. Thus, FERA permanently entered the statue book in 1957. Subsequently, this Act was replaced by the Foreign Exchange Regulation Act, 1973 (FERA, 1973), which came into force with effect from January 1, 1974. In 1974, FERA was completely overhauled with all offences being considered as criminal offences with mens rea. The Enforcement Directorate could arrest any person without even arrest warrant. In the 1990s, consistent with the general philosophy of economic reforms a sea change relating to the broad approach to reform in the external sector took place. In 1991 government of India initiated the policy of economic liberalization. Foreign investments in many sectors were
Accordingly, the Foreign Exchange Regulation Act (FERA) was repealed and replaced by the new Foreign Exchange Management Act (FEMA) with effect from June 2000. The philosophical approach was shifted from that of conservation of foreign exchange to one of facilitating trade and payments as well as developing orderly foreign exchange market.
DIFFERENCE BETWEEN FERA AND FEMA The basic differences between FERA and FEMA were:
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1. Under FERA the emphasis was on regulation of foreign exchange whereas under FEMA the emphasis was on management of foreign exchange. 2. All foreign exchange dealings (whether current account or capital account transactions) required general or special permission of the Reserve Bank of India (RBI) under FERA. Whereas under FEMA, permission for current account transactions had already been granted in the law itself (section 5), and for capital account transactions permission of RBI is required (section 6). In 1997, the Tarapore Committee recommended that India is geared up to bring capital account convertibility. In India, the foreign exchange transactions are broadly classified into two accounts: current account transactions and capital account transactions. If an Indian citizen needs foreign exchange of smaller amounts, for travelling abroad or for educational purposes, she/he can obtain the same from a bank or a money-changer. This is a “current account transaction”. But, if someone wants to import plant and machinery or invest abroad, and needs a large amount of foreign exchange, the importer will have to first obtain the permission of the Reserve Bank of India (RBI). If approved, this becomes a “capital account transaction”. This means that any domestic or foreign investor has to seek the permission from a regulatory authority, like the RBI, before carrying out any financial transactions or change of ownership of assets that comes under the capital account. Of course there are a whole range of financial transactions on the capital account that may be freed form such restrictions, as is the case in India today. But this is still not the same as full capital account convertibility. By “Capital Account Convertibility” (or CAC in short), we mean “the freedom to convert the local financial assets into foreign financial assets and vice-versa at market determined rates of exchange. It is associated with the changes of ownership in foreign/domestic financial assets and liabilities and embodies the creation and liquidation of claims on, or by the rest of the world. …” (Report of the Committee on Capital Account Convertibility, RBI, 1997) Thus, in simpler terms, it means that irrespective of whether one is a resident or non-resident of India one’s assets and liabilities can be freely (i.e. without permission of any regulatory authority) denominated (or cashed) in any currency and easily interchanged between that currency and the Rupee. 3. Under FERA all violations would attract prosecutions. FEMA diluted the rigorous enforcement provisions which were the hallmark of the erstwhile legislation. Violation of FERA was a criminal offence whereas violation of FEMA is a civil offence.
The categorization of offences under FEMA as civil and not criminal constitutes one of the most important differences between the two statutes. Contravention of FEMA provisions are dealt with under civil law procedures, for which there is a separate administrative procedure and mechanism in the form of Compounding Rules, Adjudicating Authority, Special Director (Appeals) and Appellate Tribunal. 4. Offences under FERA were not compoundable whereas offences under FEMA are compoundable. 5. Citizenship was a criteria to determine residential status of a person under FERA, while stay of More than 182 days in India is the criteria to decide residential status under FEMA. 6. Provisions in respect of Basic Travel Quota (BTQ), business travel, export commission, gifts, donations etc. have been considerably liberalised in FEMA. 7. FEMA is a civil law, while FERA was a draconian police law.
OVERVIEW OF FEMA The Foreign Exchange Management Act, 1999 was enacted to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India. In fact it is the central legislation that deals with inbound investments into India and outbound investments from India and trade and business between India and the other countries. The FEMA provides: Free transactions on current account subject to reasonable restrictions that may be imposed RBI control over Capital Account Transactions Control over realization of export proceeds Dealings in Foreign Exchange through Authorised Person (e.g Authorised Dealer/ Money Changer/ Off-shore Banking Unit) Adjudication of Offences Appeal provisions including Special Director (Appeals) and Appellate Tribunal Directorate of Enforcement
APPLICABILITY Foreign Exchange Management Act, 1999 extends to the whole of India. The Act also applies to all branches, offices and agencies outside India owned or controlled by a person resident in India and also to any contravention there under committed outside India by any person to whom this Act applies.
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Provisions of FEMA, 1999 and Rules and Regulations there under
FEMA has considerably liberalised provisions in respect of foreign exchange. However, sometimes an extraordinary situation may arise. In such cases, Central Government can suspend operation of any or all provisions of FEMA in public interest, by issuing a notification. The suspension can be relaxed by issuing a notification. Copy of Notification shall be placed before Parliament for 30 days. (Section 40)
5 Sets of Rules made by Ministry under section 46 of FEMA (Subordinate or delegated Legislations)
23 sets of Regulations made by RBI under section 47 of FEMA (Subordinate or delegated Legislations)
Master circulars issued by RBI on 1st July of every year
Foreign Direct Investment policy issued by Department of Industrial Policy and Promotion
OVERALL SCHEME
Reserve Bank of India notifications and circulars
Enforcement Directorate
FEMA makes provisions for dealings in foreign exchange Broadly, all Current Account Transactions are free. However Central Government can impose reasonable restrictions by issuing rules (section 3 FEMA) Capital account transactions are permitted to the extent specified by RBI by issuing Regulations (Section 6 FEMA) FEMA envisages that RBI shall have a controlling role in management of foreign exchange. Since RBI cannot directly handle foreign exchange transactions, it authorizes “Authorised Persons” to deal in foreign exchange as per directions issued by RBI. (Section 10 FEMA) RBI is empowered to issue directions to such “Authorised Persons” u/s 11. These Directions are issued through AP(DIR) circulars. (AP stands for Authorised Person and DIR stands for Directions) FEMA also makes provisions for enforcement, penalties, adjudication and appeal. Provisions of FEMA cannot be found at one place but are spread over at different places. The FEMA 1999 contains only basic legal framework. The practical aspects are covered in Rules made by Central Government and Regulations made by RBI. Industrial Policy announced by Ministry of Industry, contains provisions in respect of FDI, foreign technical collaboration, royalty payments, joint ventures abroad, etc. which are directly relevant to understanding the provisions of FEMA. Policy in respect of External Commercial Borrowings (ECB) and FCCB/ADR/GDR is announced and controlled by Ministry of Finance. Instructions/Guidelines etc. of Securities and Exchange Board of India (SEBI) become relevant when capital market is involved.
FEMA contains 7 Chapters divided into 49 sections of which 12 sections cover operational part and the rest contravention, penalties, adjudication, appeals, enforcement directorate, etc. As far as transactions on account of trade in goods and services are concerned, FEMA has by and large removed the restrictions except for the enabling provision for the Central Government to impose reasonable restrictions in public interest. The capital account transactions will be regulated by RBI / Central Government for which necessary circulars / notifications will have to be issued under FEMA. CHAPTER I – Preliminary (Sec 1&2) CHAPTER II- Regulation and Management of Foreign Exchange (Sec 3 –9) CHAPTER III – Authorised Person (Sec 10 –12) CHAPTER IV – Contravention and Penalties (Sec 13-15) CHAPTER V – Adjudication and Appeal (Sec 16- 35) CHAPTER VI – Directorate of Enforcement (Sec 36-38) CHAPTER VII- Miscellaneous (Sec 39 – 49) Besides the FEMA, there are 5 rules and 23 regulations under the Act which help in implementation of the Act. The Rules under FEMA are: 1. F.E.M.(Encashment of Draft, Cheque, Instrument and Payment of Interest) Rules, 2000 2. F.E.M. (Authentication of Documents) Rules, 2000 3. F.E.M. (Current Account Transaction) Rules, 2000 4. F.E.M. (Adjudication Proceedings and Appeal) Rules, 2000 5. F.E.M. (Compounding Proceedings) Rules, 2000 The Regulations under FEMA are:
STRUCTURE The legislations, rules and regulations, regulating Foreign Exchange Management can be divided into the following:
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1. F.E.M. (Acquisition and Transfer of Immovable Property Outside India) Regulations, 2000 2. F.E.M. (Borrowing and Lending in Rupees) Regulations, 2000 3. F.E.M. (Borrowing or Lending in Foreign Exchange) Regulations, 2000 (A - 420) NOVEMBER 2011
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4. F.E.M. (Deposit) Regulations, 2000 5. F.E.M. (Export and Import of Currency) Regulations, 2000 6. F.E.M. (Guarantees) Regulations, 2000 7. F.E.M. (Issue of Security in India by a Branch, Office or Agency of a Person Resident Outside India) Regulations, 2000 8. F.E.M. (Acquisition and Transfer of Immovable Property in India) Regulations, 2000 9. F.E.M. (Establishment in India of Branch or Office or Other Place of Business) Regulations, 2000 10. F.E.M. (Export of Goods and Service) Regulations, 2000 11. F.E.M. (Foreign Currency Accounts by a Person Resident in India) Regulations, 2000 12. F.E.M. (Insurance) Regulations, 2000 13. F.E.M. (Investment in Firm or Proprietary Concern in India) Regulations, 2000 14. F.E.M. (Manner of Receipt and Payment) Regulations, 2000 15. F.E.M. (Permissible Capital Account Transactions) Regulations, 2000 16. F.E.M. (Possession and Retention of Foreign Currency) Regulations, 2000 17. F.E.M. (Realization, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 18. F.E.M. (Remittance of Assets) Regulations, 2000 19. F.E.M. (Transfer or Issue of Security by a person Resident outside India) Regulations, 2000 20. F.E.M. (Foreign Exchange Derivative Contracts) Regulations, 2000 21. F.E.M. (Transfer or Issue of any Foreign Security) Regulations, 2004 22. F.E.M. (Offshore Banking Unit) Regulations, 2002 23. F.E.M. (Withdrawal of General Permission to Overseas Corporate Bodies (OCBs) Regulations, 2003
6. Risk Management and Inter-Bank Dealings 7. External Commercial Borrowings and Trade Credits 8. Import of Goods and Services 9. Export of Goods and Services 10. Instructions relating to deposits held in FCNR(B) Accounts 11. Interest Rates on Rupee Deposits held in Domestic, Ordinary Non-Resident (NRO) and Non-Resident (External) (NRE) Accounts 12. Foreign Contribution ( Regulation ) Act, 1976Obligations of banks in regulating receipt of foreign contributions by associations/ organizations in India 13. Rupee/ Foreign Currency Export Credit and Customer service to exporters
Important Forms under FEMA
Master circulars issued by RBI 1. Direct Investment by Residents in Joint Venture (JV)/ Wholly Owned Subsidiary (WOS abroad
Sr. Form No. No.
Form Title
1.
Form FC GPR
Report by Indian Companies issuing shares or convertible debentures are issued to foreign investors
2.
Form A1
Application for Remittance in Foreign Currency
3.
Form A2
Application for Drawal of Foreign Exchange
4.
FORM BEF
Statement showing details of remittances affected towards import in respect of which documentary evidence of import has not been submitted by the importers despite reminders
5.
FORM CD
Fcurrency Declaration Form (CDF)
6.
Form ECB
Annex-1Application for Raising External Commercial Borrowings under Approval Route
7.
FORM ECB
Annex 3 Reporting of Actual Transactions of ECB under Foreign Exchange Management Act, 1999
8.
Form ETX
Application for permission to extend the period for realisation of export proceeds
9.
Form FCTRS
Declaration regarding transfer of shares of by way of sale from resident to non resident/ non-resident to resident
10. Form
Establishment in India of a branch or office
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FNC 1 11. Form GRDUP 12. Form GRORG
or other place of business by a person resident outside India Exchange Control Declaration (GR) Form No. Exchange Control Declaration Form No.
(GR)
13. Form IPI
Declaration of immovable property acquired in India by a person resident outside India
14. Form LEC (FIIs)
Statement showing company-wise details of total purchases and sale of equity share/ convertible debentures made by designated branch of.... on ......... on behalf of Foreign Institutional Investors through stock exchanges in India and out of issues directly made
15. Form LEC (NRIs)
Statement showing company-wise details of total purchases and sales of equity shares/ convertible debentures made through designated branches of ADs under Portfolio Investment Scheme on behalf of their NRI/ OCB clients 16. Form Application for remittance of legacies, LEG bequests or inheritances to beneficiaries resident outside India 17. Form Application-cum-Undertaking form for NRSR opening of Non-Resident (Special) Rupee (NRSR) Account 18. Form Proforma of Overseas Auditor/Chartered OAC Accountant/Certified Public Accountant’s Certificate 19. Form Proforma of Overseas Auditor/Chartered OAC 1 Accountant/ Certified Public Accountant’s Certificate 20. Form Application for permission to post a OBR representative/establishoffice/branch overseas 21. Form Direct Investment in Joint Venture (JV)/ ODA wholly owned subsidiary (WOS) abroad under Automatic Route 22. FORM Form Overseas Direct Investment (ODI) ODI 23. Form Statement of Positions for the week ended POS .........20........... 24. Form Exchange Control (Exporter’s Declaration) PP (Original)
25. Form PP 26. Form RSupplementary Return 27. Form R-Return (NOSTRO) 28. Form RReturn (VOSTRO) 29. Form RBM 1 30. Form RBM 2 31. Form REC 32. Form RFC 33. Form RFN 34. Form RMC – FRE 35. Form RRD 36. Form SCH 1
37. Form SCH 2 38. Form SCH 3
39. Form SCH 4
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Exchange Control (Exporter’s Declaration) (Duplicate Supplementary statement of Non-Export Receipts equivalent of Rs. 1,00,000/- and above
Return of transactions for the fortnight ended
Return of operation of VOSTRO Accounts for the fortnight ended
Offer for spot sale of U.S. dollars to the Reserve Bank of India Offer for purchase of U.S. dollars from Reserve Bank of India Statement showing position of unreconciled entries in Nostro Accounts as on 31 March/ 30 September ....... Application for Opening an RFC Account Application for transfer of assets by foreigners retiring from India Stricted Money Changer
Special report on rupee dealings with overseas banks for the month of.............. Schedule of remittances effected for/credits afforded to Vostro A/c towards payments of imports [Item I.A. of R-Return (NOSTRO)/ Col. 3(a) of R-Return (VOSTRO)] Schedule of remittances effected for purposes other than imports [Item I.C. of R-Return (NOSTRO)/Col. 4 of R-Return (VOSTRO)] Schedule giving particulars of GR/PP/ SOFTEX forms where full payment has been received [Item IIA of R-Return (NOSTRO)/ Column 7 of R-Return (VOSTRO)] Schedule giving details of GR/PP/SOFTEX forms where part payment has been received [Item IIA of R-Return (NOSTRO)/Column 7 of R-Return (VOSTRO)] (A - 422) NOVEMBER 2011
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41. Form SCH 6
42. Form SDF 43. Form STAT 10 44. Form STAT 5 45. Form STAT 6
46. Form STAT 8 47. Form STAT 9 48. Form TC 49. Form TCD 50. Form TCK 51. Form TCR 52. Form TRA 53. Form TS 1 54. Form XOS
Provisions of FEMA, 1999 and Rules and Regulations there under
Schedule giving details of full export proceeds received in advance [Item IIA of R-Return (NOSTRO)/Column 7 of R-Return (VOSTRO)] Schedule giving details of part export proceeds received in advance [Item IIA of R-Return (NOSTRO)/Column 7 of R-Return (VOSTRO)] Declaration by Exporter Statement showing inflow/outflow of deposits under Resident Foreign Currency (RFC) Accounts Scheme for the month of.. Statement showing inflow/outflow of deposits under Foreign Currency (NonResident) Accounts (Banks) Scheme for the month of Statement showing purchase of exchange in the form of travelers cheques, currency notes and coins and drawings under inward travelers letters of credit during the quarter ended Statement showing inflow/outflow of deposits under Non-Resident (External) Rupee (NRE) Accounts Scheme for the month of ................. Statement showing inflow/outflow of deposits under Non-resident (Nonrepatriable) Rupee Deposit (NRNR) Scheme for the month of............ Approvals of Trade Credit granted by all branches during the (Month / Year)………… Foreign Collaboration Agreement - Return for the year ended 31st December...... Certificate for Payment of Technical knowhow fee under Foreign Technical collaboration Certificate for payment of royalty under foreign technical collaboration Statement of sale of foreign currency for travel purposes Application for Transfer of shares of a company registered in India by a nonresident to a person resident in India Statement of particulars of export bills outstanding beyond the prescribed period/due date of realisation as at 30th June/31st December 20
Related Legislations Certain other Legislations have a bearing on FEMA. Such allied acts include: Foreign Trade (Development and Regulation) Act, 1992 Foreign Trade (Regulation) Rules 1993 Foreign Trade (Exemption from application of Rules in certain cases) Order, 1993 Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 Smugglers and Foreign Exchange Manipulators (Appellate Tribunal for Forfeited Property) Rules, 1977 Smugglers and Foreign Exchange Manipulators(Receipt, Management and Disposal of Forfeited Property) Rules, 2006 Appellate Tribunal for Forfeited property(Fees) Rules, 1987 Appellate Tribunal for Forfeited property(Procedure) Rules, 1986 Prevention of Money Laundering Act, 2002 Set of 7 rules under PML Act, 2002 Foreign Contribution (Regulation) Act, 1976 The Foreign Contribution (Regulation) Rules, 1976 The Foreign Contribution (Acceptance or Retention of Gifts or Presentations) Regulations, 1978 The Foreign Contribution (Regulation) Act, 2010 (in force from May 1, 2011) Foreign Contribution (Regulation) Rules, 2011( in force from May 1, 2011) Guidelines issued by the Reserve Bank. Foreign Trade Policy 2009-14. Uniform Customs and Practice for Documentary Credits (UCPDC ICC 500). Foreign Exchange Dealer’s Association of India (FEDAI) Rules
Securities and Exchange Board of India (SEBI) guidelines
AUTHORITIES AND MACHINERY UNDER FEMA
ENFORCEMENT
FEMA in itself is not an independent and isolated law. The provisions of FEMA are spread at different places and so are there regulatory bodies. Reserve Bank of India (RBI) makes regulations for FEMA and the rules are made by Central Government.
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Though RBI is the overall controlling authority in respect of FEMA, enforcement of FEMA has been entrusted to a separate “Directorate of Enforcement” formed for this purpose. (Section 36)
Besides RBI, following other regulators are involved in FEMA:
Ministry of Industry, Government of India which announces Industrial Policy which contains provisions in respect of Foreign Direct Investment, foreign technical collaboration, joint ventures, royalty payments etc.
Ministry of Finance, Government of India which controls External Commercial Borrowings, FCCB, ADRs, and GDRs
Directorate of Enforcement which is directly involved in enforcement of FEMA.
Besides this SEBI, Income Tax, Custom Laws, FCRA, SAFEMA, COFEPOSA are some acts whose provisions are relevant in FEMA.
Authorities governing the enforcement of FEMA:
Foreign Exchange Department of Reserve Bank of India (RBI) - www.fema.rbi.org.in
Directorate of Enforcement, Department of Revenue, Ministry of Finance- http://directorateofenforcement. gov.in
Capital Markets Division, Department of Economic Affairs, Ministry of Finance – http:// finmin.nic.in/the ministry/dept eco affairs/
Foreign Trade Division, Department of Economic Affairs, Ministry of Finance – http:// finmin.nic.in/the ministry/dept eco affairs/
Machinery responsible for various aspects of FEMA is: 1. Enforcement Directorate - To investigate provisions of the Act, the Central Govt. have established the Directorate of Enforcement with Director and other officers as officers of the Enforcement. 2. Adjudicating Authority - The adjudicating authority will issue a notice to the person who has contravened the provisions of the Foreign Exchange Management Act, Rules, Regulations, Notifications or any directions issued by the RBI. 3. Special Director (Appeals) - Any person aggrieved by an order made by the Adjudicating Authority, being an Assistant Director of Enforcement or a Deputy Director of Enforcement can prefer an appeal to the Special Director (Appeals). 4. Appellate Tribunal - Any person aggrieved by an order made by the Adjudicating Authority, or the Special Director (Appeals) can prefer an appeal to the Appellate Tribunal 5. Foreign Exchange Department of RBI (Earlier till 31.1.04, known as Exchange Control Department) 6. Foreign Investment Implementation Authority (FIIA) 7. Foreign Investment Promotion Board 7. The Authority for Advance Rulings (AAR) pronounces rulings on the applications of the non-resident/residents submitted in the prescribed form following prescribed procedure and such rulings are binding both on the applicant and the income-tax department Though FEMA does not treat violation of FEMA provisions as a criminal offence, prevention detention under COFEPOSA for violation of FEMA is permissible, as FEMA and COFEPOSA occupy different fields. – UOI v. Venkateshan 2002 AIR SCW 1978 = 38 SCL 669 (SC).
ENFORCEMENT DIRECTORATE (Website of the Directorate - http://www.directorateofenforcement. gov.in/) The Directorate of Enforcement is mainly concerned with the enforcement of the provisions of the Foreign Exchange Management Act to prevent leakage of foreign exchange which occurs through malpractices. Directorate has to detect cases of violation and also perform substantial adjudicatory functions to curb malpractices.
Organization Set-Up The Enforcement Directorate is an attached office of the Ministry of Finance, Department of Revenue. Prior to 1st May, 1956, the responsibility for enforcement of exchange control laws under FERA 1947 was discharged by the Investigation and Enforcement Section in the Exchange Control Department of the R.B.I. This system had a number of handicaps, the main being that enforcement action under FERA was incompatible with the role of RBI as the country’s central banker. As such, with effect from 1.5.1956, a separate Enforcement Unit was set up under the Ministry of Finance. Subsequent to the passing of FERA (Amendment) Act, 1957, the name of the Enforcement Unit was changed to Enforcement Directorate, in October, 1957. FERA was again amended in 1973 and was made effective from 1.1.1974. The Directorate of Enforcement is under the administrative control of the Department of Revenue for operational purposes; the policy aspect of the Act and its legislation and its amendments are however within the purview of the Department of Economic Affairs. The background of keeping the policy aspects relating to the Act in the Department of Economic Affairs is that -
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involved in the formulation of policy responses at the macro level to the changing economic scenario; and
2. To collect and develop intelligence relating to violation of the provisions of Foreign Exchange Management Act and Prevention of money Laundering Act 2002.
(ii) the Department of Economic Affairs coordinates with RBI in respect of trade and invisible transactions and banking aspects of the Act.
3. To conduct searches of suspected persons, conveyances and premises and seize incriminating materials (including Indian and foreign currencies involved)
Headquarters – New Delhi - The Directorate of Enforcement - headed by its Director
4. To enquire into and investigate suspected violations of provisions of Foreign Exchange Management Act, 1999 and Prevention of money Laundering Act 2002.
The Directorate of Enforcement is under administrative control of Department of Revenue, Ministry of Finance, Govt. of India. It has Headquarters at New Delhi and has ten zones at Mumbai, Kolkata, Delhi, Chandigarh, Chennai, Ahmedabad , Bangalore, Lucknow, Cochin and Hyderabad.
5. To adjudicate cases of violations of Foreign Exchange Management Act penalties departmentally and also for confiscating the amounts involved in violations. 6. To realize the penalties imposed in departmental adjudication;
The Headquarters are located at : Directorate of Enforcement 6th Floor , Lok Nayak Bhawan Khan Market, New Delhi – 110 003 Ph : 011-24693577,24690682, 24690625
7. To attach and confiscate properties involved in the act of Money laundering.
The Directorate is headed by its Director - a post which is of the rank of Secretary to the Government of India. Besides, there are three Special Directors of Enforcement and one Additional Director of Enforcement and two Deputy Director at Head Office.
Three Special Directors of Enforcement Below the level of Director, there are three Special Directors. Two of them are posted at Delhi while the third post is for Mumbai.
Zonal Offices- headed by the Deputy Directors The Enforcement Directorate, with its Headquarters at New Delhi has seven zonal offices at Mumbai, Kolkata, Delhi, Jalandhar, Chennai, Ahmedabad and Bangalore. The zonal offices are headed by the Deputy Directors.
Sub-Zonal Offices – headed by Assistant Directors The Directorate has nine sub-zonal offices at Agra, Srinagar, Jaipur, Varanasi, Trivandrum, Calicut, Hyderabad, Guwahati and Goa, which are headed by the Assistant Directors.
Special Unit at Madurai The Directorate has also a Unit at Madurai, which is headed by a Chief Enforcement Officer.
Functions The main functions of the Directorate are as under: 1. To enforce Foreign Exchange Management Act 1999 and Prevention of money Laundering Act 2002.
8. To arrest the person suspected to be involved in the act of money laundering. 9. To prosecute the person involved in the act of money laundering. In addition to the above functions relating to the Foreign Exchange Management Act. Directorate also processes and recommends cases for detention of habitual offender under the Conservation of Foreign Exchange and Prevention of Smuggling Act (COFEPOSA) 1974 (52 of 1974), which provides interalia for detention of a person with a intention of preventing him from acting in a manner prejudicial to the conservation and augmentation of exchange.
APPELLATE EXCHANGE
TRIBUNAL
FOR
FOREIGN
The Appellate Tribunal for Foreign Exchange is a successor to the Foreign Exchange Regulation Appellate Board, which ceased to exist with the repealing of the Foreign Exchange Regulation Act, 1973, with effect from May 31, 2000. Accordingly, all appeals which were pending before the FERA Board stood transferred under Section 49, sub-section (5), clause (b) of the Foreign Exchange Management Act with effect from June 1, 2000. The Appellate Tribunal hears appeals from the orders of Enforcement Directorate under the defunct FERA with a sunset clause valid until May 31, 2002 and its successor enactment titled the Foreign Exchange Management Act, 1999. The Appellate Tribunal for Foreign Exchange was established on 1st June, 2000, vide Government of India Notification No.
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S.O. 53(E) dated 1.6.2000 issued under section 18 of Foreign Exchange Management Act (FEMA), 1999. Under section 19 of FEMA, the Central Government or any person aggrieved by an order made by Special Director (Appeals), or made by an Adjudicating Authority other than referred to in sub-Section (1) of Section 17, may prefer an appeal to the Appellate Tribunal that may be filed within 45 days from the date of receiving the order by the aggrieved person or the Central Government. Section 20 of FEMA, provides that the Appellate Tribunal shall consist of a Chairperson and such number of members as the Central Government may deem fit. The jurisdiction of the Appellate Tribunal may be exercised by the Benches. The Bench may be constituted by the Chairperson, with one or more Members as the Chairperson deems fit. The Benches of the Appellate Tribunal shall ordinarily sit at New Delhi and at such other places as the Central Government may, in consultation with the Chairperson, notify and the Chairperson may transfer a Member from one Bench to another Bench. If at any stage it appears that the matter should be heard by a Bench of two Members the Chairperson may transfer the matter to such Bench as he deems fit. A person who is qualified to be a Judge of a High Court or is or has been a Judge of High Court can be appointed as Chairperson of the Tribunal and person who has been or is qualified to be a District Judge can be appointed as a Member of the Tribunal.
RESERVE BANK OF INDIA The Foreign Exchange Department of the Reserve Bank (Till 31.1.2004, the Department was known as Exchange Control Department) administers Foreign Exchange Management Act, 1999, (FEMA) which has replaced the earlier Act , FERA, with effect from June 1, 2000. For purchase of foreign exchange for most of the current account transaction, with exception of those listed in Schedule III to the Government of India Notification G.S.R. No 381(E) dated May 3, 2000; no permission from the Reserve Bank is required. Extensive powers are available to banks authorised to deal in foreign exchange, known as authorised dealers. As a result, foreign exchange can be purchased for practically all transactions which are of current account nature.
UNDERSTANDING SOME KEY TERMS Residential status is the most important factor for determining the applicability of the Act. The types of persons that are covered under the Act are –
Persons resident in India
Non-resident Indian (NRI)
Persons resident outside India
Overseas Corporate Body (OCB)
Persons of Indian Origin (PIO)
Persons Person may be natural person, legal person or others. A natural person is any human being, with legal capacity commencing from the time of birth. A legal or artificial person is an association of people that is recognized by law as having legal personality. Others include firms and association of persons that are not incorporated. As per Section 2 (u) of FEMA, “Person” includes(i) An individual, (ii) A Hindu undivided family, (iii) A company, (iv) A firm, (v) An association of persons or a body of individuals, whether incorporated or not, (vi) Every artificial juridical person, not falling within any of the preceding sub-clauses, and (vii) Any agency, office or branch owned or controlled by such person; Person resident in India For applicability of FEMA residential status of the persons plays an important role. The FEMA get triggered only when there is a transaction between a resident Indian and a nonresident. However, the criteria for determination of residential status are different in case of FEMA than in the case of Income Tax Act. As per Section 2 (v) of FEMA “Person resident in India” means(i) A person residing in India for more than one hundred and eighty-two days during the course of the preceding financial year but does not include;(A) A person who has gone out of India or who stays outside India, in either case(a) For or on taking up employment outside India, or (b) For carrying on outside India a business or vocation outside India, or (c) For any other purpose, in such circumstances
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as would indicate his intention to stay outside India for an uncertain period;
NRI
(B) A person who has come to or stays in India, in either case, otherwise than(a) For or on taking up employment in India, or (b) For carrying on in India a business or vocation India, or (c) For any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period; (ii) Any person or body corporate registered or incorporated in India, (iii) An office, branch or agency in India owned or controlled by a person resident outside India, (iv) An office, branch or agency outside India owned or controlled by a person resident in India;
FEMA 13
A person resident outside India who is either a citizen of India or is a person of Indian origin
A person resident outside India who is a citizen of India
Person of Indian origin A “Person of Indian Origin” is defined under Clause 2 (xii) of Foreign Exchange Management (Deposit) Regulations, 2000 as follows: ‘Person of Indian Origin’ means a citizen of any country other than Bangladesh or Pakistan, if (a) He at any time held Indian passport; or
Note: To become a resident under the Act, it is necessary that a person should have resided in India for at least 183 days during the previous financial year i.e. 1st April to 31st Mar and the calendar year has no importance As per sec 2 (w) of FEMA “Person resident outside India” means a person who is not resident in India;
FEMA 5, FEMA 20 and FEMA 24
(b) he or either of his parents or any of his grand- parents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955); or (c) The person is a spouse of an Indian citizen or a person referred to in sub-clause (a) or (b); Thus,
Non-Resident Indian
Person of Indian origin (PIO)
A non-resident Indian (NRI) means a person resident outside India who is a citizen of India or is a person of Indian origin. (Regulation 2(vi) of Foreign Exchange Management (Deposit) Regulations, 2000)
Citizen of any country other than Bangladesh and Pakistan
Although FEMA, 1999 defines a person resident in India and a person resident outside India it does not define the term non-resident nor does it define the term Non Resident Indian (NRI). However, the term “Non- resident Indian” is defined in the Regulations as hereunder:
(a) He at any time held an Indian passport
(b) He or either of his parents or his grandparents was a citizen of India
(c) He is a spouse of an Indian citizen or a person as defined in (a) or (b)
Definitions of “Persons of Indian origin” in the Regulations FEMA 5 and FEMA 13
FEMA 21
FEMA 24
A citizen of any country other than Bangladesh or Pakistan, if (a) he at any time held Indian passport; Or
An individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan), who
‘Person of Indian Origin’ means a citizen of any country other than Bangladesh or Pakistan or Sri Lanka, if
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(b) he or either of his parents or any of his grand- parents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955); Or (c) The person is a spouse of an Indian citizen or a person referred to in sub-clause (a) or (b);
(a) at any time, held Indian passport; or (b) who or either of whose father or whose grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955);
(a) he at any time held Indian passport; Or (b) he or either of his parents or any of his grand- parents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955); Or (c) the person is a spouse of an Indian citizen or a person referred to in subclause (a) or (b);
Overseas Corporate Body
Currency
Overseas Corporate Body means a company, partnership firm, society and other corporate body owned directly or indirectly to the extent of at least 60% by non-resident Indians and includes overseas trust in which not less than sixty percent beneficial interest is held by Non-resident Indians directly or indirectly but irrevocably. (Regulation 2(xi) of Foreign Exchange Management (Deposit) Regulations, 2000)
In economics, the term currency can refer to a particular currency, for example Pound Sterling, or to the coins and banknotes of a particular currency, which comprise the physical aspects of a nation’s money supply.
Further, Regulation 2(vi) of the Foreign Exchange Management (Withdrawal of General Permission to Overseas Corporate Bodies (OCBs)) Regulations, 2003 states that ‘Overseas Corporate Body (OCB) ‘ means and includes an entity defined in Clause (xi) of Regulation 2 of the Foreign Exchange Management (Deposit) Regulations, 2000 and which was in existence on the date of commencement of these Regulations and immediately prior to such commencement was eligible to undertake transactions pursuant to the general permission granted under the Regulations
REGULATION AND FOREIGN EXCHANGE
MANAGEMENT
OF
Foreign Exchange refers to money denominated in the currency of another nation or group of nations like Euro. Foreign exchange can be cash, funds available on credit cards and debit cards, traveler’s checks, bank deposits, or other shortterm claims Section 2(n) of FEMA states that “foreign exchange” means foreign currency and includes,(i) deposits, credits and balances payable in any foreign currency, (ii) drafts, travelers cheques, letters of credit or bills of exchange, expressed or drawn in Indian currency but payable in any foreign currency, (iii) drafts, travelers cheques, letters of credit or bills of exchange drawn by banks, institutions or persons outside India, but payable in Indian currency;
Some currency is freely convertible i.e one can exchange these currencies with any other currency without any restriction. E.g Dollars (USA), pound Sterling (UK), Euro (European Common Currency), Swiss Franc, Yen (Japan) etc. This is often called “Hard Currency”. Indian Rupee is not fully convertible. As per Regulation 2(v) of FEM (Manner of Receipt and Payment) Regulations, 2000 , “permitted currency” means a foreign currency which is freely convertible. By currency, we normally understand coins and notes, but definition in FEMA is quite wide and includes cheques, Letter of Credit etc. Section 2(h) of FEMA defines “currency” as – ‘currency’ includes all currency notes, postal notes, postal orders, money orders, cheques, drafts, travelers cheques, letters of credit, bills of exchange and promissory notes, credit cards or such other similar instruments, as may be notified by the Reserve Bank. Vide Notification No. FEMA 15/2000/RB dated 3rd May,2000, RBI has notified ‘debit cards’, ATM cards or any other instrument by whatever name called that can be used to create a ‘financial liability’, as ‘currency’. “Currency notes” means and includes cash in the form of coins and bank notes. (Section 2(i) FEMA). “Indian currency” means currency which is expressed or drawn in Indian rupees but does not include special bank notes and special one rupee notes issued under section 28A of Reserve Bank of India Act, 1934 (these are issued on special occasions like Gandhi centenary etc.). (Section 2(q) FEMA) “Foreign currency” means any currency other than Indian currency. (Section 2(m) FEMA).
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Regulation and Management of Foreign Exchange
TRANSACTIONS COVERED UNDER FEMA
Section 3 of FEMA prohibits dealings in foreign exchange except through an authorised person.
As stated earlier all transactions between a resident and a non resident is covered in FEMA, these transaction can be broadly classified in two groups current account transactions and capital account transactions.
No person can, without general or special permission of the RBI(a) Deal in or transfer any foreign exchange or foreign securities to any person not being an authorised person. (b) Make any payment to or for the credit of any person resident outside India in any manner. (c) Receive otherwise through an authorised person, any payment by order or on behalf of any person resident outside India in any manner (d) Enter into any financial transaction in India as consideration for or in association with acquisition or creation or transfer of a right to acquire, any asset outside India by any person Section 4 of FEMA restrains any person resident in India from acquiring, holding, owning, possessing or transferring any foreign exchange, foreign security or any immovable property situated outside India except as specifically provided in the Act. The terms “foreign exchange” and “foreign security” are defined in sections 2(n) and 2(o) respectively of the Act. Important provisions in this regard are: (a) The Act allows a person resident in India to hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India if the same was transacted when he was resident outside India or inherited from a person who was resident outside India. (b) The Act also allows a person resident outside India to hold, own, transfer or invest in Indian currency, etc. situated in India if the same was transacted by him when he was resident in India or inherited from a person who was resident in India. (c) The Act fixes a responsibility on persons resident in India who have any amount of foreign exchange due or accrued in their favour to get the same realized and repatriated to India within the period and manner specified by RBI. (d) Any person can sell or draw foreign exchange to or from an authorized person if such sale or drawal is a current account transaction. However, the Central Government may impose reasonable restrictions in public interest. (e) Any person can draw or sell foreign exchange from or to an authorized person for a capital account transaction however subject to the provision that the capital account transactions will be regulated by RBI / Central Govt. for which necessary circulars / notifications will have to be issued under FEMA.
Capital account transaction As per sec 2 (e) “Capital account transaction” means a transaction which alters the assets or liabilities, including contingent liabilities, outside India of persons resident in India or assets or liabilities in India of persons resident outside India, and includes transactions referred to in subsection (3) of section 6. The following transactions are therefore regarded as Capital Account Transaction (a) Transfer or issue of any foreign security by a person resident in India; (b) Transfer or issue of any security by a person resident outside India; (c) Transfer or issue of any security or foreign security by any branch, office or agency in India of a person resident outside India; (d) Any borrowing or lending in foreign exchange in whatever form or by whatever name called; (e) Any borrowing or lending in rupees in whatever form or by whatever name called between a person resident in India and a person resident outside India; (f) Deposits between persons resident in India and persons resident outside India; (g) Export, import or holding of currency or currency notes; (h) Transfer of immovable property outside India, other than a lease not exceeding five years, by a person resident in India; (i) Acquisition or transfer of immovable property in India, other than a lease not exceeding five years, by a person resident outside India; (j) Giving of a guarantee or surety in respect of any debt, obligation or other liability incurred,(i) By a person resident in India and owed to a person resident outside India; or (ii) By a person resident outside India. Though the norms of Capital Account Transactions have been considerably relaxed, as a general rule all capital account are prohibited unless specifically allowed. Permissible capital account transactions are governed by the Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000 (Notification FEMA 1/2000-RB). This Regulation lists the permissible capital account
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transactions in two schedules. It deals with drawal of foreign exchange for certain capital account transactions by a person resident in India and by a person resident outside India. Any person can sell or draw foreign exchange to or from authorized persons for activities prescribed in these schedules to limits prescribed in relevant regulations.
Schedule II - Capital Account transactions of a person resident outside India (a) Investment in India by a person resident outside India, that is to say, I Issue of security by a body corporate or an entity in India and investment therein by a person resident outside India; and (Notification No. FEMA 20 / 2000-RB)
No person should undertake or sell or draw foreign exchange to or from an authorised person for any capital account transaction but a resident individual can draw from an authorised person foreign exchange not exceeding USD 2,00,000 per financial year for a capital account transaction specified in Schedule I.
Schedule I - Capital Account transactions of a person resident In India (a) Investment by a person resident in India in foreign securities (Notification No. FEMA 19 /2000-RB) (b) Foreign currency loans raised in India and abroad by a person resident in India (Notification No. FEMA 03 / 2000-RB) (c) Transfer of immovable property outside India by a person resident in India (Notification No. FEMA 07 / 2000-RB) (d) Guarantees issued by a person resident in India in favour of a person resident outside India (Notification No. FEMA 08 /2000-RB) (e) Export, import and holding of currency/currency notes (Notification No. FEMA 6 /2000-RB) (f) Loans and overdrafts (borrowings) by a person resident in India from a person resident outside India (Notification No. FEMA 03 & 04 /2000-RB) (g) Maintenance of foreign currency accounts in India and outside India by a person resident in India (Notification No. FEMA 10 /2000-RB) (h) Taking out of insurance policy by a person resident in India from an insurance company outside India (Notification No. FEMA 12 /2000-RB) (i) Loans and overdrafts by a person resident in India to a person resident outside India (Notification No. FEMA 3 & 4 /2000-RB) (j) Remittance outside India of capital assets of a person resident in India (USD 100,000 per financial year (April- March) vide RBI/2006-2007/379 A. P. (DIR Series) Circular No. 51dated 08.05.2007) (k) Sale and purchase of foreign exchange derivatives in India and abroad and commodity derivatives abroad by a person resident in India. (Notification No. FEMA 25 /2000-RB)
II investment by way of contribution by a person resident outside India to the capital of a firm or a proprietorship concern or an association of persons in India. (Notification No. FEMA 24 /2000-RB) (b) Acquisition and transfer of immovable property in India by a person resident outside India. (Notification No. FEMA 21 /2000-RB) (c) Guarantee by a person resident outside India in favour of, or on behalf of, a person resident in India. (Notification No. FEMA 8 /2000-RB) (d) Import and export of currency/currency notes into/from India by a person resident outside India. (Notification No. FEMA 6 /2000-RB) (e) Deposits between a person resident in India and a person resident outside India. (Notification No. FEMA 5 /2000RB) (f) Foreign currency accounts in India of a person resident outside India. (Notification No. FEMA 5 /2000-RB) (g) Remittance outside India of capital assets in India of a person resident outside India. (Notification No. FEMA 13/2000-RB)
Current account transaction Section 2 (j) of FEMA defines “Current account transaction� as a transaction other than a capital account transaction and without prejudice to the generality of the foregoing such transaction includes,(i) Payments due in connection with foreign trade, other current business, services, and short-term banking and credit facilities in the ordinary course of business, (ii) Payments due as interest on loans and as net income from investments, (iii) Remittances for living expenses of parents, spouse and children residing abroad, and (iv) Expenses in connection with foreign travel, education and medical care of parents, spouse and children; As per the provisions laid down in Section 5, a person may 1557
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sell or draw foreign exchange freely for his current account transactions, except in a few cases where limits have been prescribed The Central Government has the power to regulate current account transactions. Unless the transaction is restricted, Foreign exchange can be drawn for the same.
SCHEDULE II contains transactions which require prior approval of the Government of India.
Current Account transactions are governed by the Foreign Exchange Management (Current Account Transactions) Rules, 2000 (Notification No.GSR.381(E), dated 03/05/2000).
1. Cultural Tours – Ministry of Human Resource Development (Department of Education and Culture)
Given below is the Purpose of Remittance and the concerned Ministry/Department of Government of India whose approval is required
2. Advertisement in foreign print media for the purposes other than promotion of tourism, foreign investments and international bidding (exceeding US$ 10,000) by a State Government and its Public Sector Undertakings Ministry of Finance, Department of Economic Affairs.
Drawal of foreign exchange for the following purposes are prohibited:
A transaction specified in Schedule I.
Travel to Nepal and/or Bhutan.
Transaction with a person resident in Nepal or Bhutan.
3. Remittance of Freight of vessel chartered by a PSU Ministry of Surface Transport (Chartering Wing)
Drawal means drawal of foreign exchange from an authorized person and includes opening of Letter of credit or use of International Credit Card or International Debit Card or ATM Card or any other thing by whatever name called which has the effect of creating foreign exchange liability.
4. Payment of import through ocean transport by a Government Department or a PSU on c.i.f. basis (i.e., other than f.o.b. and f.a.s. basis) - Ministry of Surface Transport (Chartering Wing) 5. Multi-modal transport operators making remittance to their agents abroad Registration Certificate from the Director General of Shipping
Current Account Transactions are covered under the following:
Transactions prohibited under Schedule I.
Transactions that require prior approval of Government of India, mentioned in Schedule II
Transactions that require prior approval of Reserve Bank of India, mentioned in Schedule III
6. Remittance of hiring charges of transponders by (a) TV Channels - Ministry of Information and Broadcasting (b) Internet service providers - Ministry of Communication and Information Technology
The schedule I list the following transactions which are prohibited:
7. Remittance of container detention charges exceeding the rate prescribed by Director General of Shipping Ministry of Surface Transport (Director General of Shipping)
1. Remittance out of lottery winnings. 2. Remittance of income from racing/riding, etc. or any other hobby.
8. Remittance of prize money/sponsorship of sports activity abroad by a person other than International/National/ State Level sports bodies, if the amount involved exceeds US$ 100,000 - Ministry of Human Resource Development, (Department of Youth Affairs and Sports)
3. Remittance for purchase of lottery tickets, banned/ prescribed magazines, football pools, sweepstakes, etc. 4. Payments of commission on exports made towards equity investment in joint ventures/wholly owned subsidiaries abroad of Indian companies. 5. Remittance of dividend by any company to which the requirement of dividend balancing is applicable. 6. Payment of commission of exports under Rupee State Credit Route, except commission up to 10% of invoice value of exports of tea and tobacco.
9. Remittance for membership of P&I Club - Ministry of Finance (Insurance Division)
SCHEDULE III contains transactions which require prior approval of the Reserve Bank of India
Release of exchange exceeding US $ 10,000 or its equivalent in one financial year, for one or more private visits to any country (except Nepal and Bhutan).
Gift remittance exceeding US$ 5,000 per financial year per remitter/donor other than resident individual.
7. Payment related to “Call Back Services” of telephones. 8. Remittance of interest income on funds held in NonResident Special Rupee Scheme Account.
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Donations by corporate, exceeding one per cent of their foreign exchange earnings during the previous three financial years or US$ 5,000,000, whichever is less, for,
creation of Chairs in reputed educational institutes;
to funds (not being an investment fund) promoted by educational institutes; and
to a technical institution or body or association in the field of activity of the donor company.
Exchange facilities exceeding US $ 100,000 for persons going abroad for employment.
Exchange facilities for emigration exceeding US $ 100,000 or amount prescribed by country or emigration.
Remittance for maintenance of close relatives abroad,
brought into India or US $1,00,000, whichever is higher, by an entity in India by way of reimbursement of preincorporation expenses.
Donation exceeding US$ 5,000 per financial year per remitter/donor other than resident individual.
exceeding net salary (after deduction of taxes, contribution to provident fund and other deductions) of a person who is resident but not permanently resident in India and – (a) is a citizen of a foreign State other Pakistan; or (b) is a citizen of India, who is on deputation to the office or branch or subsidiary or joint venture in India of such foreign company. Exceeding US $ 100,000 per year per recipient, in all other cases.
Release of foreign exchange, exceeding US$ 25,000 to a person, irrespective of period of stay, for business travel, or attending a conference or specialized training or for maintenance expenses of a patient going abroad for medical treatment or check-up abroad, or for accompanying as attendant to a patient going abroad for medical treatment/check-up.
Release of exchange for meeting expenses for medical treatment abroad exceeding the estimate from the doctor in India or hospital/doctor abroad.
Release of exchange for studies abroad exceeding the estimates from the institution abroad or US $ 100,000 per academic year, whichever is higher.
Commission, per transaction, to agents abroad for sale of residential flats or commercial plots in India exceeding USD 25,000 or 5% of the inward remittance whichever is more.
Remittances exceeding five percent of the investment
Remittances exceeding US$ 10,00,000, per project, for any consultancy service in respect of infrastructure projects and US$ 1,000,000 per project for other consultancy services procured from outside India.
Release of foreign exchange for medical treatment To enable residents to avail foreign exchange for medical treatment abroad without any hassles and any loss of time, Authorised Dealers are allowed to release foreign exchange up to an amount of USD 100,000 or its equivalent, on the basis of self declaration that the applicant is buying exchange for medical treatment outside India, without insisting on any estimate from a hospital / doctor.
Release of foreign exchange for Cultural Tours Dance troupes, artistes, etc., who wish to undertake tours abroad for cultural purposes should apply to the Ministry of Human Resources Development (Department of Education and Culture), Government of India, for their foreign exchange requirements. Authorised Dealers will thereon release foreign exchange based on the strength of the sanction from the concerned Ministry.
Remittances for tour arrangements Authorised Dealers can remit foreign exchange up to a reasonable limit, at the request of a traveler towards his hotel accommodation, tour arrangements, etc., in the countries proposed to be visited by him; Authorised Dealers can effect remittances at the request of agents in India who have tie-up arrangements with hotels/ agents, etc., abroad for providing hotel accommodation or making other tour arrangements for travellers from India; Authorised Dealer can open foreign currency accounts in the name of agents in India who have tie up arrangements with hotels/agents, etc., abroad for providing hotel accommodation or making other tour arrangements for travelers from India
Payment in Rupees Authorised dealers can accept payment in cash up to Rs. 50,000 (Rupees fifty thousand only) against sale of foreign exchange for travel abroad (for private visit or for any other purpose). Wherever the sale of foreign exchange exceeds the amount equivalent to Rs.50,000, the payment must be received only by a
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Crossed cheque drawn on the applicant’s bank account, or
of downloadable software or import of any other item permissible under Foreign Trade Policy (FTP).
Crossed cheque drawn on the bank account of the firm/ company sponsoring the visit of the applicant, or
Banker’s Cheque/Pay Order/ Demand Draft or
Debit / credit / prepaid cards.
International Credit Cards cannot be used on internet or otherwise for purchase of prohibited items, like lottery tickets, banned or proscribed magazines, participation in sweepstakes, payment for call-back services, etc., since no drawal of foreign exchange is permitted for such items/activities. There is no aggregate monetary ceiling separately prescribed for use of ICCs through internet.
Advance Remittance for Import of services Authorised dealers can allow advance remittance for providing services under current account transaction for which the release of foreign exchange is admissible.
Use of International Credit Cards for payment in foreign exchange in Nepal and Bhutan is not permitted.
However, where the amount exceeds USD 500,000 or its equivalent, a guarantee from a bank of International repute situated outside India or a guarantee from an authorised dealer in India, if such a guarantee is issued against the counter-guarantee of a bank of International repute situated outside India, should be obtained from the overseas beneficiary.
International Debit Cards
Release of foreign exchange on the basis of selfdeclaration
International Debit Cards cannot be used on internet for purchase of prohibited items like lottery tickets, banned or proscribed magazines, participation in sweepstakes, payment for call-back services, etc., i.e. for such items/activities for which drawal of foreign exchange is not permitted.
Authorised Dealers can release foreign exchange up to USD 100,000 each for employment, emigration, maintenance of close relatives, education and medical treatment abroad without insisting on any supporting documents but on the basis of self declaration incorporating certain basic details of the transactions and submission of Form A2.
Banks authorised to deal in foreign exchange issue International Debit Cards which can be used by a resident for drawing cash or making payment to a merchant establishment overseas during his visit abroad. International Debit Cards can be used only for permissible current account transactions.
PROFESSIONAL OPPORTUNITIES COMPANY SECRETARIES
Acquisition of foreign securities under Employees Stock Option Plan (ESOP) Resident individuals who are either employees or director of an Indian office or branch of a foreign company in which foreign holding is not less than 51% are permitted to acquire foreign securities under ESOP Scheme without any monetary limit. They are also permitted to freely sell the shares provided the proceeds thereof are repatriated to India.
International Credit Cards Prior approval of Reserve Bank of India is not required for use of International Credit Cards by residents for making payment towards expenses, while on a visit outside India. Residents can use International Credit Cards on internet for any purpose for which exchange can be purchased from an Authorised Dealer in India, e.g. for import of books, purchase
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Compliances under FEMA rules and regulations and RBI circulars etc.
Consultancy in realization and repatriation of foreign exchange
Representation before Authorities
Taxation
Applications to RBI
Foreign exchange derivative contracts
Obtaining Government Approval wherever required
Adherence to compliances in matters of borrowings and lendings in foreign exchange, if permitted by RBI
Consultancy on Issue of Foreign Currency Convertible Bonds, American Depository Receipt, Global Depository Receipt etc
Valuation of Shares in certain cases.
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Changes in FDI Policy – An Analysis S.K. Noorul Hassan, ACS, Practising Company Secretary, Hyderabad.
e-mail :
hvg2006@gmail.com
The Foreign Direct Investment Policy of the Government of India has further been amended and consolidated in 2011. This brief article explains the important aspects of the changes.
The Department of Industrial Policy and Promotion (‘DIPP’), Ministry of Commerce and Industry, with an object to consolidate into one document all the prior policies/ regulations on Foreign Direct Investment (‘FDI’) which are contained in Foreign Exchange Management Act, 1999 (‘FEMA’), Reserve Bank of India (‘RBI’) regulations under FEMA and Press Notes/ Press Releases/ Clarifications issued by the DIPP and reflect the current ‘policy framework’ on FDI, brought out a ‘Consolidated FDI Policy’ for the first time on 1st April, 2010. It has also been decided that a consolidated FDI policy would be issued every half year. Third edition of such policy (Circular 1 of 2011) was issued on 31st March, 2011 effective from 1st April, 2011, followed by a Press Release highlighting major changes incorporated in the latest edition. Highlights of the major changes: A. Pricing of convertible instruments B. Issue of equity shares for certain categories C. Removal of the condition of prior approval, in case of joint ventures/ technical collaboration in the ‘same field’ D. Downstream investments
ANALYSIS OF THE CHANGES (A) Pricing of convertible instruments Convertible instruments refer to fully, compulsorily and mandatorily convertible debentures and fully, compulsorily and mandatorily convertible preference shares. As per the latest change, price/ conversion formula of convertible capital instruments should be determined upfront i.e., at the time of issue of the instruments and such price should not be lower than the fair value worked out, at the time of issuance of such instruments. The methodology of valuation to be followed in the case of
unlisted companies is Discounted Cash Flow (DCF) and SEBI (Issue of Capital and Disclosure Requirements) Regulations in the case of listed companies. The above change mandates companies to value their conversion price of convertible instruments at the time of their issue itself. However, the clause does not prescribe for the requirement of fair valuation again at the time of their conversion, so far as the allotment price is maintained at the time of their conversion. Thus, the clause only requires the conversion formula to be determined upfront at the time of allotment which will be used in arriving at the price for conversion and not the actual price for conversion, which could be higher at the time of conversion. This allows flexibility to a foreign investor in pricing convertible instruments.
(B) Issue of equity shares for certain categories The Foreign Investment Promotion Board (FIPB) in its Review Book, 2009, expressed its views on ‘Issue of shares against consideration other than cash’ that “Issues of shares for other than cash consideration require a much more deeper look and probably with their increasing numbers, some objective norms would have to be evolved soon. Though that Board has been by and large liberal to facilitate the industry, this route for FDI cannot be allowed to become a norm rather than exception it is supposed to be”. Last year, the DIPP has issued a Discussion Paper on ‘Issue of Shares for considerations other than cash’. In the Discussion Paper, DIPP felt the need to issue shares in certain cases to non-residents when the funds are not received through normal banking channels. The Discussion Paper lists out the categories of cases for issue of shares for non-cash consideration, which are as follows:
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(i) Import of Capital Goods/ Machinery/ Equipment (including second-hand machinery) (ii) Services (iii) Import of Raw material/ Trade payables (iv) Pre-operative/ Pre-incorporation expenses (including payment of rent, etc.) (v) Share Swaps (vi) Intangible Assets (including franchisee rights) (vii) One time extraordinary payments Out of the above, only two cases were included in the Consolidated Circular, under the Government route, they are: (i) Import of Capital Goods/ Machinery/ Equipment (including second-hand machinery) (ii) Pre-operative/ Pre-incorporation expenses (including payment of rent, etc.) (iii) Share Swaps The above inclusion comes with the following conditions to be complied with: (i) In the case of Import of Capital Goods/ Machinery/ Equipment (including second-hand machinery) (a) Any import of capital goods/machinery etc., made by a resident in India, has to be in accordance with the Export/Import Policy issued by Government of India/as defined by DGFT/FEMA provisions relating to imports. (b) There is an independent valuation of the capital goods/ machinery/equipments (including second-hand machinery) by a third party entity, preferably by an independent valuer from the country of import along with production of copies of documents/ certificates issued by the customs authorities towards assessment of the fair-value of such imports. (c) The application clearly indicating the beneficial ownership and identity of the Importer Company as well as overseas entity. (d) All such conversions of import payables for capital goods into FDI being done within 180 days from the date of shipment of goods. Under the Foreign Trade Policy, the term Capital goods have been defined as follows: “Capital goods” means any plant, machinery, equipment or accessories required for manufacture or production, either directly or indirectly, of goods or for rendering services, including those required for replacement, modernisation, technological upgradation or expansion. It also includes packaging machinery and equipment, refractories for initial lining, refrigeration equipment, power generating sets, machine tools, catalysts for initial charge, equipment and
instruments for testing, research and development, quality and pollution control. Capital goods may be for use in manufacturing, mining, agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, poultry, sericulture and viticulture as well as for use in service sector. Capital goods which do not fit into above definition may not be qualified for issue of shares. Further, the period of 180 days for issue of shares, is to be reckoned from the date of shipment of goods and not from the actual receipt date in India. In the proposal of M/s Kerns Aero Products Private Limited1, the FIPB has given its approval for the issue of shares against machinery imported subject to a) consent of the parent company, b) supporting audited statement, and c) meeting tax liability as per law. Thus, in the case of subsidiaries allotting shares to foreign parent companies against import of capital goods/ machinery/equipment, the above conditions may be complied with. Additionally, consideration payable on import of capital goods/ machinery/equipment on lease/ loan basis may not be qualified for allotment of shares. Further, in the matter of M/s. TCL India Holdings Pvt. Ltd., the proposal for issuing and allotting shares against trade payables was rejected. Thus, the above eligibility criteria have to be looked into before moving an application to FIPB for its approval. (ii) In the case of Pre-operative/ Pre-incorporation expenses (including payment of rent, etc.) (a) Submission of FIRC for remittance of funds by the overseas promoters for the expenditure incurred. (b) Verification and certification of the pre-incorporation/ pre-operative expenses by the statutory auditor. (c) Payments being made directly by the foreign investor to the company. Payments made through third parties citing the absence of a bank account or similar such reasons will not be allowed. (d) The capitalization being done within the stipulated period of 180 days permitted for retention of advance against equity under the extant FDI policy. One of the conditions for allotting shares against preincorporation expenses is to have a bank account in the name of the Company. However, it may not be possible for a company, which is under incorporation, to open a bank account, in which case the promoters could not remit to the company itself in India, but to someone who facilitates the incorporation of the company. Thus, this condition should be relaxed in the case of companies under incorporation. In some cases, it is seen that the foreign parent companies paying certain expenditure on behalf of Indian company, even after 1. FIPB Review Book, 2009
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incorporation, to third parties. One of such components is payment of rent. Now, the condition mandates the foreign parent company to remit the funds to the Indian subsidiary’s bank account directly, instead of paying it to third parties. Further, the capitalisation of pre-incorporation/ pre-operative expenses has to take place within a period of 180 days from the date of receipt of funds. In the companies where longer gestation periods are involved, they should keep a tab on the time of incurring the pre-operative expenses, in order to capitalise them within the due date. Pre-operative expenses are those expenses, which are incurred till the commencement of commercial operation date. Now, it is interesting to understand how the Authorised Dealer Bank would treat the purpose of remittance in FIRCs, whether as ‘pre-operative expenses’ or ‘share application money’, since 180 days cap as applicable for allotment of shares is also applicable for capitalisation of pre-operative expenses. Since, allotment of shares against pre-operative expenses requires Government approval, the Authorised Dealer Bank may not allow a particular remittance to be categorised as for the purpose of incurring pre-operative expenses. Even if the same is categorised as pre-operative expenses, ultimately the company should convert the same into share capital, after taking Government approval. Thus, the Authorised Dealer Bank may classify the remittance received for pre-operative expenses as towards ‘share application/ capital’ of the company. Thus, when a particular remittance is classified as ‘share application/ capital’ in the FIRCs, the requirement of taking Government approval do not arise, even though such remittances were used towards pre-operative expenses, so far as the condition of allotment of shares within 180 days of the remittance is satisfied, since the amount has been received under the permitted category of share application/ capital. Further, issue of shares against import of capital goods/ machinery or for pre-incorporation/ pre-operative expenses needs to satisfy the following general conditions: (a) Special resolution of the Company for conversion (b) Adherence to the pricing guidelines of RBI
(C) Removal of the condition of prior approval, in case of joint ventures/ technical collaboration in the ‘same field’ The DIPP in the Press Release on Circular 1 of 2011, expressed that “there is a felt need to attract fresh investment and technology inflows into the country, as also to reduce the levels of State intervention in the commercial sphere.Keeping in view the above, Government has decided to abolish this condition. It is expected that this measure will promote the competitiveness of India as an investment destination and be instrumental in attracting higher levels of FDI and technology inflows into the country”.
This is a welcome measure, which was relaxed previously by way of Press Note 1 of 2005 and now removed.
(D) Downstream investments Foreign investment in Indian companies can be direct or indirect. Any non-resident investment in an Indian company is direct foreign investment. Indian company would have indirect foreign investment if the Indian investing company has foreign investment in it. As per the Consolidated Circular, ‘Downstream investment’ means indirect foreign investment, by one Indian company, into another Indian company, by way of subscription or acquisition, made in accordance with guidelines and conditions provided under the Circular. The test for computing indirect foreign investment is to see whether the Indian company is owned or controlled by nonresident entities. In case an Indian company is owned or controlled by a non-resident entity, the investment made by such an Indian company into another Indian company would be considered as indirect foreign investment. Thus, the Companies have now been classified into only two categories – ‘companies owned or controlled by foreign investors’ and ‘companies owned and controlled by Indian residents’. The earlier categorisation of ‘investing companies’, ‘operating companies’ and ‘investing-cum-operating companies’ has been done away with. Though, the new guidelines are aimed to comprehensively simplify and rationalise downstream investment, by removing the complex structure of ‘investing companies’, ‘operating companies’ and ‘investing-cum-operating companies’, the concept of ‘operating-cum-investing/ investing companies’ still finds a mention in the consolidated circular, while calculating the total foreign investment.
CONCLUSION In addition to the above changes, the new consolidated policy has also removed the restriction of developing and producing of seeds and planting material under ‘controlled conditions’. The DIPP had also issued discussion papers on FDI in Limited Liability in Partnerships (LLPs), Multi-Brand Retail Trading and Defence Sector and invited views/ comments on the same. However, those changes have not been considered in the consolidated circular. There are many more reforms that are required, to make India fully liberalised. However, the removal of bottleneck of obtaining Government approval by the foreign joint venture partner, in the case of joint ventures existing as on 12th January, 2005, is a welcoming and significant move towards liberalisation. References : 1. Consolidated FDI Policy effective from April 1, 2011 2. Press Release on Circular 1 of 2011
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Essentials for Drafting a Lease Deed T.A. Srinivasen, FCS, Associate Director – Legal, HCL Technologies Limited, Chennai.
e-mail :
srinivasenta@hcl.com
Lease transactions are very common in today's trade and commerce. A lease deed ought to be drafted with enormous care and skill. An exhaustive checklist is set out in this article for the preparation of a lease deed.
Organizations including corporates today go in for leasing for meeting their spacing requirements for their business operations and corporate offices. The Lease as a form of transaction has gained lot of importance especially due to the fact that Organizations need not invest huge monies in acquiring Land and Building and block their revenues. In turn they may conserve those funds and use effectively to take care of their working capital and other business expenses there by facilitating the expansion of top line and the resultant bottom line. With Business expanding fast, more organizations require spacing requirements at short notice so as to expand their operations to serve their clientele. Entering into lease transactions in big cities and towns has thus become time sensitive and costly which requires a lot of planning/detailing to fructify into a win-win deal to both the lessor and the lessee. Though it may appear that a Lease deal does not require huge cost to be funded by the lessee, in practical terms the lessee has to incur huge costs in terms of interiors, Cabins, Ducts and other utilities which may run into several crores of rupees for maintaining appropriate quality, size catering to its requirements. This is true especially if the Lease Building comes as “Bare Shell” (with just the building without any internal structures) in contrast to “Plug and Play” (With all facilities). Therefore it is essential that the lessee has to be suitably protected by providing more detailing in the Lease Deed and also to introduce appropriate covenants to take care of its interests since the lessee is one who invests huge monies to make the property a usable one.
If the lessee is thrown out of the property all of a sudden, it will be costly in terms of money and time. Therefore the right of termination should be vested only with the lessee during say first, three to five years barring some exceptional circumstances as provided in the Lease Deed. If the Lease transaction is large in terms of square feet and rentals, then it is also necessary to protect the interests of the lessor by introducing a minimum period of lease which is usually termed as a “lock-in-period”, wherein the lessee is expected to pay rentals of that period even it vacates the property prematurely and hands over the vacant possession to the lessor. Thus a lease transaction has become more important and it is necessary to protect the interests of both the lessor and more particularly the lessee. With this background this comprehensive note on the Essentials of Drafting the Lease Deed has been prepared which will definitely help to draft a Lease Deed, both from the point of view of the lessor and the lessee. If the Lease Deed is properly drafted and executed then it will not give rise to unwanted complication and litigation. So necessary care has to be taken to prepare the Lease Deed, keeping in mind all the factors viz. commercials, finance, operations and legal to make it a fool proof and self containing. Thus execution of Lease Deed calls for Due-diligence on the part of the lessee, since the title of the property should also to be ensured for continuous and uninterrupted usage and enjoyment by the lessee.
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7. Name of lessee. The Correct Name, Age and Sex if lessee is an Individual.
CHECK LIST FOR LEASE 1. Name of lessor, Correct Name, Father’s Name, Age and Sex if lessor is an individual.
8. Country where lessee is located.
2. Legal entity of lessor: Company/Partnership/LLP/Sole Owner or other as applicable.
9. Registered Office Address and Business address of lessee (as applicable).
3. Law in terms of which the lessor is registered/constituted: Partnership/Company Law/Co-operative Society, Society etc.
10. lessee represented by whom? The Correct Name, Age, Father’s name and Designation should be mentioned.
4. Country where lessor is located.
11. Place where Lease is drawn.
5. Registered Office Address and Business Address of lessor (as applicable).
12. Power of the lessor/lessee to enter into an Agreement, scrutiny of relevant documents viz. Deeds, Memorandum and Articles of Association plus the resolution from the Board as applicable for such Authorization.
6. lessor represented by whom? The Correct Name, Age, Father’s name and Designation should be mentioned.
I. LEASE TERMS Date of Agreement Date of Possession Lease Tenure
From
To
Due Date Of Renewal Lock-In Period (If Any) Rent free period (if any)
no. of months -
Is there any Option to Renew? If yes means
By Whom?
Lessor
Yes
No
Lessee
Both
What is the increase percentage of Rent? Due date/period of Option to Renew Investment in Immovable Fixtures (actual/expected)
Amount in Rs. ........................
Security Deposit
Amount in Rs. ........................
Advance Rent
Amount in Rs. ........................
Is there any other additional deposits?
Yes
No
Name of the Deposit 1. ........................
Amount in Rs. ........................
2. ........................
Amount in Rs. ........................
3. ........................
Amount in Rs. ........................
DETAILS OF COSTS A. Rental Outflow per month
Rs. ........................................
B. Maintenance Charges per month
Rs. ........................................
C. Other property related cost per month viz Carpark Rent Maintenance other amenities Rs. ........................................ D. Total Cost per month
Rs. ........................................
A detailed description, size, exact address of the Plot of Land and Building on which the Leased Premises is constructed/to be constructed, together with its drawings containing inter-alia its schedule Location, Sketch etc. 1565
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II. TITLE CHECKLIST
(b) In case of Minor
(1) Ensure that lessor is the rightful owner and has the right, title and interest in the Property (2) Check if the ownership by the lessor of the Plot is free from all encumbrances, mortgages or lien or Court Decree; (3) Determination of Ownership status & test of lease Rights: Correctness of Title to the property by the landlord: (a) Obtain Copies of Title Deed & Encumbrance Certificates (b) Obtain Regulatory Authorities approved Building Plan (CMDA/NOIDA etc.) and ensure compliance is effected. (c) Obtain latest Municipal Tax/Water Tax/Sewerage Charges receipt to ensure possession of the property by the lessor. (d) Obtain latest Electricity Charges Card/Receipt and evaluate the applicable Tariff Rates. (e) Are there any pending Litigations or Encumbrances (details may be obtained), and analyse how it will affect the stay in the Premises. (f) Previous Lessee's Lease agreement (The previous lessee/Realtor may be contracted if necessary to elicit more information like litigation and other weak points). (g) To check whether there exists any mortgages registered on the property and is there any requirement to pay the rentals to any bank/financial institution. Also cause a search report with the Registrar of Companies to find Equitable Mortgage if the lessor is a Company. In that case the mandates may be obtained. (h) Right of Termination of Lease: If the lessee is investing heavily on the interiors and other amenities then it would be good to reserve the right of termination only to the lessee. The Right of Termination will be to the lessor only when there is default in payment of Lease Rentals of three months or more by the lessee.
It is to be found whether the minor a natural guardian or appointed by court. The Deposits and Rentals to be paid only to the Guardian for the benefits of the Minor. Care may be taken to execute the Lease afresh on Minor attaining Majority and payment effected in the name of the minor. (c) In case of Power of Attorney Holder Does the PoA have the requisite powers to execute a Lease Deed and to receive rents? Rentals and Deposit remittances should always be made in the lessor’s name only. (d) In case of Company If there any prohibition in the Memorandum and Articles to let out the Property on Lease? Whether there is a resolution in place to let out the property on Lease. The Lease Deed should be signed by the Chairman/MD/ Director or any person authorized by the Board on behalf of the Company. (e) In case of Partnership It is to be ensured that none of the partners are insolvent or receivership or claim is pending against them. The partnership deed should not contain apparent restrictions on letting out the subject property. (f) In case of Sub-Lease If the Property is being Sub-let, the current lessor must have Authority to sub-lease the Property as provided for in the Principal Lease Deed (g) Is the property ready for immediate occupation and if not when the lessee will get the vacant possession for occupation? This has to be clearly stated in the Lease Deed. (h) Whether the Rental Obligations would be effective from the date of taking possession? The exact Date of commencement of Rental obligations with Holiday Period as agreed upon with the lessor. The same has to be taken into consideration.
Warranty that the lessor shall hand-over that finished Leased Premises (as agreed) on or before the Handing Over Date.
Representations & Warranties of the lessor to the effect that it owns the premises with clear Legal Title. lessor will obtain all licenses and is fully empowered to lease the leased premises. lessor
III. ASSIGNMENT PROVISION (a) In case of Joint Owners: Title deed, proportion of ownership and rented payments and security deposits to whom and in what proportion must be obtained for incorporation.
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should also covenant that it has obtained all regulatory approvals for construction of premises. In case the same is not complied and the lessee is put into problem the lessor must indemnify the lessee. 2. Are the terms of agreement as to the Lease period is appropriate and is the Stamp duty adequately discharged. Date of Stamp paper Date of Agreement Date of possession in line with requirement Stamp duty and registration charges need to be verified and decided. This will depend on the period of lease. Who will bear Stamp duty and registration cost? Whether it is going to be shared in the ratio of 50:50 between the lessor and the lessee or the lessee is taking the same in full.
(8) Obligation on the lessor to intimate lessee about the change in Ownership, Constitution, Re-organization should be clear and incorporated. (9) Rent Escalation Clause – the terms must be clear in regard to escalation for Rent/Maintenance Charges/Deposit and periodicity. (10) Refund/Interest applicability must be clear on delay in the refund of Deposit by the lessor and in regard to adjustability of rent advance already made by the lessor. The lessee may reserve the right to withhold possession of the subject premises without payment of rent until the Rental Advance is refunded by the lessee.
IV. FACILITIES Always check for the detailed Specifications of the Premises:
Floors
Net leasable area
Quality of Building
3(b) All typographical error/corrections/amendments are to be initialed/signed by both the parties.
Clear heights and the type of flooring
Ceiling
(4) In case the Property is a New Built-up property: The lessee should seek Completions Certificate from the Regulatory Authorities. Obtain Property Tax Assessments, Water & Sewerage Tax Assessments and Payment Receipts made up to date, as applicable.
Tiling
Fire fighting equipments and escapes routes
Toilets
Sanctioned Power v. Proposed Usage
5(a) Was the previous users of the property were EoU/STPI units/SEZ.
Lifts
Power back-up
3(a) All Agreement signed by the Authorized officials of both the lessor and lessee with company seal where applicable.
5(b) if the place was bonded whether proper Debonding procedures were complied before executing Lease Deed or taking possession of the Premises. 5(c) Confirm that there are no Industrial Relations/Wage settlement/HR issues pending/against the lessor and there is no attachment on the subject property. 6(a) Whether Land/Building/Other infrastructure requires NoC from the Industrial Estate Associations (Like NOIDA, SIDCO, SIPCOT, KIADB etc.) If so obtained? Whether the Land use is restricted and is the sanction for constructing Residential structures or Commercial Structures or Industrial Structures? Whether separate monthly payment has to be made to any Association in that locality/Industrial Area.
Access/Pathways (11) Is the Entrance Gate exclusive to lessee usage or Specify name of other users if the gate is Common with others. (12) Elevator/Stair case when exclusive to lessee must be clearly brought out in the Agreement. (13) Norms should be followed in regard to minimum open space requirements. (14) Safety norms viz. Emergency Exit, Stair case Exit should satisfy as per Regulatory/Lessee requirements
6(b) If it is not for Commercial Structure whether relaxation obtained?
(15) Care to be taken to ensure that the height of ceiling is appropriate to have proper AC Ducts, Concealed Lighting/ Wiring etc
(7) Clause on rent must be clear that all applicable taxes from time to time including TDS will be deducted from rentals.
(16a) It is to ensured that the building space is not more than the sanctioned space.
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(16b) The extent of utilizable space has to be incorporated correctly. 16(c) The idle space portion and expected period of such idleness and idle cost estimates must be kept on record. 17. Fire safety compliance certificate from Fire Department should be available. Exclusivity on Car/Two Wheeler Parking Space must be clearly agreed and incorporated.
(j) Work Stations. (k) Parking – Both two wheeler/four wheeler. (l) Signage Options. (m) Other facilities with regard to safety may be listed out for convenience in the deed. (n) Telecommunication.
18. Correctness of area of property :
V. LEGAL FINANCIAL CHECKLIST
(a) Map the floors approved as per plan v. the actual floors in the Building.
(20) Receipt for Security Deposit paid/obtained from the respective persons mentioned in Lease Deed.
(b) Map the Total Building Sq. ft. with the total Sq. ft. approved in the Building.
(21) Receipt for Advance Rent paid/obtained from the respective persons mentioned in Lease Deed.
(c) Map the leased portion Building Sq. ft. with the Sq. ft. approved in the Building Plan. Always go in for property without deviations. In case of commercial expediency if the same is not possible Lease out only the approved portions and leave the unapproved portions.
(22) Vendor evaluation/Market survey carried out for evaluation of terms in regard to Rentals and Deposit. Eg. News Paper Ads, competitors/group company rental terms in the closest area.
19. Infrastructures to be done by the lessor – Landlord should be properly brought in:
(23) Lease permission from the concerned authority and confirm that rent is payable to the person mentioned in the agreement.
(c) Lighting & fittings
(24) Approval of concerned Electricity Board for electrical Installation and for Genset. Confirm that there are no arrears of Generation Tax if any applicable for Genset power.
(d) Genset
(25) Approval from concerned authority for elevator.
(a) Lift (b) Air conditioners
Locations of Genset – is it in Basement/Setback Area and ensure that the Genset space provided is not reduced from the Built up Area or as agreed with the lessor. (e) Electricity Board Power – If the State has Tariff concession for the designated units like Software etc. whether appropriate approvals obtained by the lessor from Electricity Authorities, the same need to be incorporated. (f) Transformer (g) Water Water source provided – Municipal/Bore well and if there is an exclusive tank for use by lessee. (h) Sanitation Facilities including Water Treatment Plant if any provided including Rain water harvesting. This has to be clearly mentioned in the Lease Deed. (i) Interiors & Electricals.
(26) Receipts/Evidence of annual discharge of liabilities by landlord. (27) Brokerage if any paid/to be incurred and the support Documents for the same, for charging against revenue. (28) If the rent is payable in advance before the completion of Month, the appropriate accounting treatment & TDS must be highlighted and compliance effected. (29) Building Insurance if any taken by the Landlord must be incorporated in the Lease. (30) Complete list of Fixtures, Fittings, Equipments, Electricals Provided by the Landlord duly signed off by the lessee and by the lessor. (31) Whether AMC is in force for any of the equipment provided from the landlord and who will take up the annual cost of maintenance should be properly incorporated as agreed upon.
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Liability of Directors in Dishonour of Cheques R. Rajesh, ACS, Advocate, Chennai.
e-mail :
rrajeshadvocate@gmail.com
After the amendment of the Negotiable Instruments Act cheque dishonor has been made a criminal offence with serious repurcussions. How far company directors could be made liable for such an offence, is what has been probed here.
Liability under the Companies Act, 1956 A company though a legal entity is an artificial person which cannot act on its own and its day to day functioning depends upon the directors who are collectively known as the “Board of Directors” who manage the affairs of the company and who are the persons behind taking the company forward. The duties of directors are fiduciary in nature and they act as agents of the company and their office is that of trust, confidence and utmost good faith. Unlike a partnership firm, the directors are not personally liable for the debts of the company. But in respect of certain acts performed by the directors on behalf of the company in contravention of the provisions of the Companies Act, 1956 they would attract liability either civil or criminal or both. In so far as the Companies Act, 1956 is concerned, for the purpose of officer of the company who is in default, who would be liable for any punishment or penalty would be those who fall within the meaning of “officer who is in default” as per section 5 of the Act. Under the said provision the officers include the Managing director(s) or the whole time director(s) and also the directors of the company who will be held responsible for committing any default or acting in violation of the provisions of the Companies Act, 1956. The liability of such officers depends upon the punishment expressly prescribed under the said provision in which the offence is said to have been committed. In the event of no penalty or punishment expressly prescribed in any of the provisions of the Act where the offence is committed then it would neither mean that no offence is said to be committed under the said provision nor towards the said offence they are not liable to any punishment hence in such circumstances it is automatic that section 629A of the Act would come into play which has prescribed the punishment for
contravention of any provision of the Act for which no punishment is provided elsewhere in the Act. In respect of several offences committed under the Companies Act, 1956, it is not only the officers in default who are prosecuted but also the company and similarly the punishments prescribed in many offences is not only fine but also imprisonment. Hence if any offence is committed by a company to which punishment is imprisonment then how does the law enforce the punishment against the company which has committed the default. This issue cropped up before the Supreme Court while dealing a case under the Income-Tax Act, 1961 and the Supreme Court decided the issue by applying the ‘rule of harmonious construction’ which is one among the rules of interpretation of laws. The rule of harmonious construction was applied in construing and resolving the conflict between sections 276B and 278B of the Income-Tax, Act, 1961. Section 276B lays down that if a person fails to pay to the credit of the Central Government the tax deducted at source, he shall be punished with rigorous imprisonment for a term which shall not be less than 3 months and shall also be liable to fine. Section 278B expressly makes a company and its officers liable for the offences under the Act. The mandatory sentence of imprisonment prescribed by Section 276B obviously could not be applied to a company. The question, therefore, arose whether a company could at all be prosecuted under Section 276B. Resolving the conflict by harmonious construction, it was held that the Company would be liable for the offence but it will be liable to be punished only by imposition of fine. By adopting the rule of harmonious construction the mandatory sentence of imprisonment in Section 276B was interpreted to mean that it will be imposed where it is possible to impose it. [M.V. Javali
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v. Mahajan Borewell & Co., (1997) 8 SCC 72 (or) AIR 1997 SC 3964.]
Procedure for filing the Complaint under section 138 The conditions to be satisfied for the payee in order to file a complaint in writing against the drawer before the Court under Section 138 read with Section 142 towards dishonour of cheque is: firstly, the cheque must have been presented to the bank within a period of 6 months from the date on which it is drawn or till it is valid whichever is earlier; secondly the payee must make a demand for the payment of the said amount of money mentioned in the Cheque by giving a notice in writing to the drawer of the cheque within 30 days from the date of receipt of information from the bank regarding the return of the cheque as unpaid; thirdly, in the event of the drawer failing to make the payment of the said amount of money to the payee within 15 days of receipt of the said notice and finally, the payee must make a complaint to a court not inferior to Metropolitan Magistrate or a First class Judicial Magistrate within one month from the date on which the cause of action arises i.e. within one month from the expiry of the time limit of 15 days given to the drawer to make the payment upon receipt of the notice. The Court is vested with the powers to condone the delay if it is satisfied that there exists sufficient cause in not filing the complaint within the prescribed time limit.
Punishment for dishonour of Cheques Apart from the Companies Act, 1956 a company would also be liable for punishment towards contravention of the provisions of any other laws and the punishment would depend upon what has been prescribed under the respective laws. Normally in respect of the day to day business transactions it is natural that the company issues cheques towards making payment in respect of any transaction entered by it with any third party. The cheques are issued by the company through its directors or officers of the company who are duly authorized by the Company to issue the same on behalf of the company. As long as the Cheques issued by the company are honoured, the company or its officers does not have any problem since they had not committed any offence but in case of any cheque issued by the company is dishonoured then the company and the officers concerned would have to face legal consequences under the Negotiable Instruments Act, 1881. In the normal circumstances when a Cheque is issued by a person (drawer) to another person (payee) and in the event of the cheque being dishonoured then the drawer is attracted to Section 138 of the Negotiable Instruments Act, 1881 wherein the punishment prescribed for dishonour of cheques is imprisonment for a term which may extend to 2 years or with fine which may extend to twice the amount of the cheque or with both. Since the punishment of imprisonment is not more than 2 years the case is a summons case and hence the
court will issue summons for the attendance of the accused and the appearance of the accused is inevitable but the Magistrate under section 205 of Cr.PC has powers to dispense with the personal attendance of the accused.
Existence of liability Mere dishonour of cheque alone would not lead to punishment of the accused under Section 138 of the Negotiable Instruments Act, 1881. Hence in order to succeed in the complaint filed by the payee against the drawer of the cheque, the payee must apart from proving that the cheque received by him was dishonoured either due to insufficiency of funds or the amount exceeds the arrangement made with the bank or due to stop payment etc. It is also necessary to prove beyond doubt that the cheque was issued to him by the drawer towards discharge of his liability either in whole or in part. Therefore in case of dishonour of cheque where there is no liability on the part of the drawer to the payee then no case is said to be made out by the payee under Section 138 of the Negotiable Instruments Act, 1881 because it is a vital factor to prove to the satisfaction of the Court that there was liability existing while issuing the cheque and such a cheque was issued only to discharge that liability. Hence in case of a gift or voluntary donation etc. there is no liability on the part of the drawer to pay the payee. In such cases punishment cannot be imposed under section 138 in the event of dishonour of cheque. In respect of dishonour of cheque issued by a company in addition to the applicability of Section 138, the provisions of Section 141 would apply which specifically deals with offences committed by a company. Apart from the company being directly responsible towards dishonour of the cheque issued by it even the persons who at the time the offence was committed was in charge of and was responsible for the conduct of the business of the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished under the Act. If a person could prove that the offence was committed without his knowledge or he had exercised all due diligence to prevent the commission of such offence then he can escape punishment under Section 138 of the Act. The word ‘person’ refers to a person who is a signatory to the cheque irrespective of whether he is a director or not. It also includes directors who are responsible in the management of the day to day affairs of the company. The directors are attracted to proceedings initiated towards dishonour of cheques because of their vicarious liability for the offence committed by the company. In case of a Company, a person who is incharge of and was responsible to the Company for the conduct of the business of the Company need not necessarily be a director, manager, secretary etc. in order to attract punishment under Section 138. Though a director is liable if he is incharge of the affairs of the company still the 2nd proviso of
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Section 141(1) inserted w.e.f. 06.02.2003 expressly excludes directors nominated by the Central Govt. or State Govt. or financial corporations owned or controlled by any of these Govts. and they are not liable for prosecution under section 138. Further Section 141 also gives an explanation for the term ‘company’ which means any body corporate and includes a firm or other association of individuals and the term ‘director’ in relation to a firm, means a partner in the firm hence Section 141 equally applies to a partnership firm and partners who are in-charge in managing the affairs of the firm.
Law v. Reality Though the law is very specific in stating that in respect of an offence committed under section 138 is a Company only a person who at the time the offence was committed was in charge of, and was responsible to the company for the conduct of the business of the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished under section 138 still in reality in most of the complaints filed under Section 138 read with Section 141 where the offence is committed by a company it has been a routine practice to include all the directors of the company apart from the company as parties (accused) to the case ignoring the fact whether they are signatory to the cheque or not. The purpose could be to pressurize the company and its directors for recovering the amount due from the cheque at the earliest without any further loss of time. The accused in a criminal case is expected to appear during each hearing and the court of course has the power to dispense with their appearance and in the event of the directors failing to appear in person or through their counsel despite service of summons the court would proceed in issuing warrant against the directors of the company who are shown as accused in the case for producing them before the Court. The question as to whether a particular director is a necessary party or not, whether he was responsible for the conduct of the business of the company or not, whether he had knowledge about the offence or not etc. would be considered only during the course of the trial and until such time the director has to participate in the court proceedings which may be a great hardship for the innocent directors who may even be unaware of either the issue of a cheque or dishonour of the said cheque. For the convenience and speedy recovery of the amount by way of settlement it is one way of pressure tactics sometimes adopted by the complainant against the company by making all its directors as accused to the case. In many cases the company and its directors in order to avoid embarrassments, humiliation etc. at the very beginning of the case itself they would prefer to settle the dispute by paying the amount without going into the question of whether the company is actually liable to pay such amount or not and whether a director or directors are actually liable in respect of that particular transaction.
Therefore several times, the question arose as to whether all the directors of a company can be held liable for dishonour of cheque issued by a company and can they be made a party to the proceedings initiated under Section 138 of the Negotiable Instruments Act, 1881 and in the event an innocent director is made a party to the proceedings what is his way out? Though in legal parlance until a person is proved to be guilty he is presumed to be innocent but still It would be a strenuous task in going through the cumbersome legal process in a criminal case and by the time a person proves himself to be innocent he would have either undergone a mental agony or spent considerable time in attending the court proceedings particularly during trial.
When a director is liable and when he is not? If it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of any director he shall be liable to be proceeded against and punished accordingly whereas if a director proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence he shall not be liable to punishment under this Section.
Remedy Now dealing with the issue of dishonour of cheque issued by a company and criminal proceedings initiated against the company and its directors, in the event of a director who is not in charge of the day to day affairs of the company is made an accused in the case then what is the legal recourse which he can opt in order to overcome such a situation where for no reason he is made a party to the case. The High Court in exercise of its inherent powers under section 482 of Cr.PC can quash the criminal proceedings in order to prevent abuse of the process of any court or otherwise to secure the ends of justice. Section 482 of Cr.PC closely resembles the inherent powers given to the Civil Court under section 151 of C.P.C. This provision also applies to proceedings relating to dishonour of cheques where a person who is not a necessary party in a case but has been arrayed as an accused in the complaint then he has got every right to move the High Court under section 482 of Cr.PC to quash the proceedings pending against him if he is able to completely satisfy the Court that he is in no way connected to the proceedings and he being made a party is merely an abuse of process of law. At the same time it is not a valid defence, the company and its directors cannot shirk their criminal liability on the ground that the Company was already wound up and the Official Liquidator has taken charge of the affairs of the Company. The High Court under section 482 exercises its powers cautiously and very sparingly to prevent any abuse of the process of any court. The Court would refuse to interfere if
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prima facie offence had been made out on the basis of the allegations made in the complaint without going into the truth or otherwise of those allegations. In case of complaint regarding dishonour of cheques, the High Court in exercise of its power conferred under section 482 is said to have committed an error if it had gone into the facts of the case and arriving at a conclusion that the cheques were issued not towards any debt or liability existing on the date on which it was issued. Where the complaint prima facie discloses that the petitioner is a director and is involved in the day to day affairs of the business of the company, the question as to whether the petitioner is actively involved in the affairs or not, is a pure question of fact, which cannot be decided in a petition under section 482 of Cr.PC. The said question shall have to be decided based on the materials to be collected during the course of the trial.
Decisions of Supreme Court in cases under section 138 The Supreme Court has repeatedly held that first of all in order to make a director liable in respect of dishonour of cheque issued by a company there must be a specific averment or allegation made against the said director and he must have been a person responsible for the conduct of the day to day affairs of the company and sufficient evidence must be produced to show that he was in charge of or responsible to the company for the conduct of the business of the company. In Wahi's case, the facts were that the appellant presented a criminal complaint under section 138 read with Section 141 of the Negotiable Instruments Act, 1881 before the Magistrate court against a company and its directors claiming that their liability is joint and several. The directors filed an application before the said court to drop the proceedings against them as they were not directors and no allegations were made against them but the Magistrate dismissed their application on the ground that whether they were directors at the relevant point of time or not is to be decided on evidence. The directors thereafter moved the High Court under section 482 of Cr.PC to quash the proceedings against them in which the High Court held that the preliminary evidence does not establish that the directors were either in charge of or were responsible to the company for the conduct of business hence allowed their application by quashing the proceedings before the Magistrate Court. The complainant challenging the decision of the High Court preferred an appeal before the Supreme Court and the said Court while dismissing the appeal enunciated the grounds on which a director could be made liable in a case of dishonour of cheque issued by a company. They are: there must be specific allegations and averments made against the directors who are shown as accused, those directors must be in charge of, and responsible for the conduct of the business of the company. This averment is an essential requirement under Section 141 and has to be made in a complaint. Merely a person being a
director of a company is not sufficient to make the person liable under Section 141 of the Act. Normally a director cannot be deemed to be in charge of and responsible to the company for conduct of its business unless it is proved. So far the Managing directors or Whole time directors are concerned they would be admittedly in charge of the company and responsible to the company for the conduct of its business by virtue of the office they hold and therefore they get covered under section 141 and similarly the signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will also be covered under section 141(2) of the Negotiable Instruments Act, 1881. [N.K. Wahi v. Shekahar Singh and Others (2007) 137 Comp Cas 939 (SC).] Even in National Small Industries Corp. Ltd. v. Harmeet Singh Paintal and Another (2010) 154 Comp Cas 313 (SC), the Court following the same principles has further added that (i) the primary responsibility is on the complainant to make specific averments as required under the law in the complaint so as to make the accused vicariously liable and for fastening the criminal liability, there is no presumption that every director knows about the transaction. (ii) Section 141 does not make all the directors liable for the offence. The criminal liability can be fastened only on those who, at the time of commission of the offence, were in charge of and were responsible for the conduct of the business of the company (iii) Vicarious liability on the part of a person must be pleaded and proved and not inferred (iv) if the accused is the Managing director or a joint managing director then it is not necessary to make specific averment in the complaint and by virtue of that position he is liable to be proceeded with (v) if the accused is a director or an officer of a company who signed the cheques on behalf of the company then also it is not necessary to make specific averment in complaint.
Conclusion It is a settled law that not all the directors of a company are liable in case of dishonour of cheques. The onus is on the complainant to prove that a director is responsible for the conduct of the affairs of the company in order to hold him liable and in the absence of a specific averment in the complaint no director is liable under section 138 of the Negotiable Instruments Act, 1881 unless he is a MD or JMD or WTD or he is a signatory to the Cheque. The directors can establish the fact that they are not guilty either by undergoing the trial before the Magistrate Court in which the complaint is filed or by approaching the High Court under section 482 at the earliest before the commencement of the trial inorder to quash the proceedings against him as he is no way connected to the proceedings initiated before the Magistrate Court under section 138 read with Section 141 of the Negotiable Instruments Act, 1881.
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Nominee Vs. Legal Heirs L.H. Khilnani, FCS, VP (Legal) & Company Secretary, Jyoti Structures Ltd. Mumbai.
e-mail : mail@lhkhilnani.com
The legal position of a nominee has always been accepted to be that of an ‘agent’ or ‘trustee’ and nomination is not considered to be a kind of testamentary succession. Nomination did not operate as a third kind of succession which could be styled as a statutory testament. A nominee could not be treated as being equivalent to an heir or legatee. The Bombay High court has recently differentiated the position of nominee as laid down by Supreme Court, by citing a difference in the language of applicable law, and has ruled that “ on the death of the share holder, the nominee would become entitled to all rights in the shares to the exclusion of all other persons”.
‘Nominee’ is a person to receive the benefits under nomination and distribute the same to the legal heirs, in accordance with the applicable law of succession. ‘Nomination’ is an act by which an individual designates the person(s) who will receive the benefit on his death. However, it is neither a will nor an assignment. Various enactments deal with the subject in different aspects. Nomination is solely for the purpose of simplifying the procedure for settlement of claims of deceased and does not take away the rights of legal heirs on the estate of the deceased. Nomination is an ideal tool to mitigate hardships in settlement of claims in the event of death. So far, the law on nomination has consistently been understood to be the law laid down by the Courts in the case of insurance proceeds. Various High Courts in India in different cases, have held that nominee under Insurance Act is nothing more than an agent to receive the money due under the life insurance policy. The money as such received remains the property of the assured during his lifetime and on his death forms part of his estate subject to the law of succession applicable to him. Allahabad Court in Kesari Devi v. Dharma Devi1 and Delhi High Court
in S. Fauza Singh v. Kuldip Singh2 and Uma Sehgal v. Dwarka Dass Sehgal3 had, however, taken a different view. The legal position of a nominee has always been accepted to be that of an ‘agent’ or ‘trustee’ and nomination is not considered to be a kind of testamentary succession. The Supreme Court in case of Sarbati Devi v. Usha Devi4 held that a mere nomination made under the Insurance Act did not have the effect of conferring on the nominee any beneficial interest in the amount payable under the insurance policy on the death of the assured. The nomination only indicated the hand which was authorised to receive the amount on the payment of which the insurer got a valid discharge of its liability under the policy. The policy holder continued to have interest in the policy during his lifetime and the nominee acquired no sort of interest in the policy during the lifetime of the policy holder. On the death of the policy holder, the amount payable under the policy became part of his estate which was governed by the law of succession applicable to him. Such succession may be testamentary or intestate. Provisions pertaining to the nomination in the insurance Act did not operate as a third 2. AIR 1978 Del 276 3. AIR 1982 Del 36
1. AIR 1962 All 355
4. AIR 1984 SC 346
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kind of succession which could be styled as a statutory testament. A nominee could not be treated as being equivalent to an heir or legatee. The amount of interest under the policy could, therefore, be claimed by the heirs of the assured in accordance with law of succession governing them. The SC in case of Shipra Sengupta5 held that the position of nomination is no longer res integra and the nominee is entitled to receive the benefit, but the amount so received is to be distributed according to the law of succession. The court further commented that in view of the clear legal position, it is made abundantly clear that the amount in any head can be received by the nominee, but the amount can be claimed by the heirs of the deceased in accordance with law of succession governing them. In other words, nomination does not confer any beneficial interest on the nominee. In Vishin Kanchandani v. Vidya Khanchandani6 case the Supreme Court made it clear that though language and phraseology of Section 6 of the Government Savings Certificate Act, 1959 is different than the one used in Section 39 of the Insurance Act, yet the effect of both the provisions is the same. The court held that law laid down by this court in Sarbati Devi’s case (supra) holds field and is equally applicable to the nominee becoming entitled to the payment of the amount on account of National Saving certificates. Nomination under Section 39 of the Insurance Act did not operate as a third kind of succession which could be styled as a statutory testament. A nominee could not be treated as being equivalent to an heir or legatee. The amount of interest under the policy could, therefore, be claimed by the heirs of the assured in accordance with law of succession governing them. Though the provisions in respect of nomination, in each statute like Insurance, Government Savings Certificate, Co-operative Societies, etc. may be worded differently, the legal position of a nominee has always been accepted to be that of a trustee and nomination is not considered to be a kind of testamentary succession. The law on nomination of shares, held in companies, has taken a new meaning with perhaps the first interpretation of the provisions governing nomination in the Companies Act, 1956 by the Bombay High Court in case of Harsha Nitin Kokate v. The Saraswat Coop. Bank Ltd. [Notice of Motion N. 2351 of 2008 in Suit No. 1972 of 2008 dated 28.4.2010] Interpreting Section 109A of the Companies Act and ByeLaws 9.11 of the NSDL Bye-Laws, the court has ruled that 5. (2009) 10 SCC 680 6. AIR 2000 SC 2747
it is abundantly clear that the intent of the nomination is to vest the property in the shares which includes the ownership rights there under in the nominee upon nomination validly made as per the procedure prescribed, as has been done in this case. These Sections are completely different from Section 39 of the Insurance Act set out which require a nomination merely for the payment of the amount under the Life Insurance Policy without confirming any ownership rights in the nominee or under Section 30 of the Maharashtra Cooperative Societies Act which allows the Society to transfer the shares of the member which would be valid against any demand made by any other person upon the Society. Hence these provisions are made merely to give a valid discharge to the Insurance Company or the Cooperative Society without vesting the ownership rights in the Insurance Policy or the membership rights in the Society upon such nominee. The express legislature intent under Section 109A of the Companies Act and Bye-Law 9.11 of the NSDL Bye-Laws is clear. Upon such nomination the shares would vest in the nominee in the event of the death of the holder and that the nominee should become entitled to all the rights in the shares of the company to the exclusion of all other persons. The Bombay High Court has differentiated the position of nominee as led down by Supreme Court in Sarbati Devi’s case (supra), by citing a difference in the language of applicable law, and held that position of a nominee under section 109A of the Companies Act is not merely that of a trustee for the estate of the deceased, and it further held that, “ on the death of the share holder, the nominee would become entitled to all rights in the shares to the exclusion of all other persons”. This means that, the nominee will be made the beneficial owner thereof and all the rights incidental to ownership of shares would follow i.e. the right to transfer, pledge or hold the shares. The Court opined that on nomination under the insurance contract, nomination entails payment by the Insurance Company to the nominee to obtain a complete discharge. Once the amount under the Policy is paid to the nominee, the nominee would hold it in Trust or the Estate because under the Insurance Act there is no legislative provision that the nominee would obtain any other right. The nomination under Section 109A of the Companies Act does not entail mere payment of the amount of shares. It specifically vests the property in the shares in the nominee, in the event of the death of the holder of the shares. Section 109A of the Companies Act provides that upon the death of a shareholder, the shares would “vest” in the nominee. The provision adds that the nominee shall become entitled to
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all the rights attached to the shares to the exclusion of all others regardless of anything stated in any other disposition, testamentary or otherwise. Therefore, regardless of what is stated in privately executed wills, a company would have to only deal with the nominee as a person now exercising the rights of the deceased shareholder. Relying on various SC judgements Fruit & Vegitable Merchants Union v. Delhi Improvement Trust AIR 1957 SC 344 at page 353; Dr. M Esmail Frauqui v. UOI AIR 1995 SC 605 ; Municipal Corporation of Greater Mumbai v. Hindustan Petroleum Corp. (2001) 8 SCC 143 ; Bharat Coking Coal Ltd. v. Karam Chand Thapar & Bros. Pvt. Ltd. (2003) 1 SCC 6 Section 109A of the Companies Act is required to be interpreted with regard to the vesting of the shares of the holder of the shares in the nominee upon his death. The act sets out that the nomination has to be made during the life time of the holder as per procedure prescribed by law. If that procedure is followed, the nominee would become entitled to all the rights in the shares to the exclusion of all other persons. The nominee would be made beneficial owner thereof. Upon such nomination, therefore, all the rights incidental to ownership would follow. This would include the right to transfer the shares, pledge the shares or hold the shares. The specific statutory provision making the nominee entitled to all the rights in the shares excluding all other persons would show expressly the legislative intent. Once all other persons are excluded and only the nominee becomes entitled under the statutory provision to have all the rights in the shares none other can have it. Further Bye-Law 9.11 of the NSDL Bye-Laws makes the nominee’s position superior to even a testamentary disposition. The non-obstante Clause in Bye-Law 9.11.7 gives the nomination the effect of the Testamentary Disposition itself. Hence, any other disposition or nomination under any other law stands subject to the nomination made under the NSDL Bye-Laws. Bye-Law 9.11.7 further shows that the last of the nominations would prevail. This shows the revocable nature of the nomination much like a Testamentary Disposition. A nomination can be cancelled by the holder and another nomination can be made. Such later nomination would be relied upon by the Depository Participant. That would be for conferring of all the rights in the shares to such last nominee. A reading of Section 109A of the Companies Act and ByeLaw 9.11 of the NSDL Bye-Laws makes it abundantly clear that the intent of the nomination is to vest the property in the shares which includes the ownership rights there under in the nominee upon nomination validly made as per the procedure prescribed, as has been done in this case. These Sections are completely different from Section 39 of the Insurance Act,
which require a nomination merely for the payment of the amount under the Life Insurance Policy without confirming any ownership rights in the nominee or under Section 30 of the Maharashtra Co-operative Societies Act (MCS) which allows the Society to transfer the shares of the member which would be valid against any demand made by any other person upon the Society. Hence these provisions are made merely to give a valid discharge to the Insurance Company or the Cooperative Society without vesting the ownership rights in the Insurance Policy or the membership rights in the Society upon such nominee. The express legislature intent under Section 109A of the Companies Act and Bye-Law 9.11 of the NSDL Bye-Laws is clear. Thus, it may be seen that the language used in each statute varies and the consequences intended wherefrom will also accordingly vary. However, most of these statutes indicate clearly that the purpose of nomination is to provide a valid discharge to the cooperative society or bank or as the case may be and that it does not preclude the legal heirs of the deceased from asserting their claim in the property. Until judgement of Bombay High Court, the legal position of nominee was well settled that mere nomination made in favour of a particular person does not have the effect of conferring on the nominee any beneficial interest in property after the death of the person concerned. With the Bombay High Court holding that the nominee would become entitled to all the rights in the shares to the exclusion of all other persons, the legal position of nominee under the Companies Act is no longer res integra. By ruling that nomination under the Companies Act confers ownership of shares on the nominee to the exclusion of all others, the court has altered and destroyed the course of succession under law and created conflict of judicial opinion on the settled legal position crystallized by the judgement of Sarbati Devi. With this, nominee is considered as a custodian of most of the assets, except shares. On the death of the shareholder, the nominee would become entitled to all the rights in the shares to the exclusion of all other persons. The judgement presents an immediate and urgent agenda item for investor education on the law governing succession and nomination. The author in this article has dealt with the entire anatomy of the concept of nomination and has made an attempt to provide answers to all probable questions by way of ‘FAQs’.
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FA Qs Sl. No. 1
Question
Answer
Who is a nominee?
A nominee is someone who has been nominated for something. In legal parlance, nominee is ‘a person to receive the benefits under nomination and distribute the same to the legal heirs/beneficiaries under law’. For a Common Man, nominee is a person designated by the policyholder to receive the proceeds of an insurance policy, upon the death of the insured. A nominee is statutorily recognized as a payee who can give a valid discharge to the Corporation for the payment of policy monies.
2
What is nomination?
Nomination is the process of appointing a person to take care of your assets in the event of your death. Nomination in insurance is the act of naming a person to receive policy moneys payable in the event of the death of the policy owner. In Insurance, nomination is a right conferred on the holder of the policy of life insurance on his own life to appoint a person or persons to receive the policy moneys in the event of the policy becoming a claim by death.
3
Who is a legal heir?
A person legally entitled to inherit the property of someone who dies intestate is called a legal heir. An individual who receives an interest in, or ownership of, land, tenements, or hereditaments from an ancestor who has died intestate, through the laws of Descent & Distribution.
4
What do you mean by a beneficiary?
Beneficiary is one that receives a benefit. A recipient of funds, property, or other benefits, as from an insurance policy or will is called a beneficiary.
5
For which benefits nomination facility can be availed
Nomination facility can be availed by an individual in case of assets/facilities like Insurance Policy, Bank A/c, Locker, Society, Demat A/c, Shares, NSC, Post Office, Mutual Fund, PF, PPF & Gratuity.
6
Who can nominate?
Only individuals holding beneficiary accounts either singly or jointly can make nominations. Bank account holders having deposit accounts in their individual names or in joint names of two or more individuals can appoint a nominee to their accounts. Any policyholder, who is a major and the life insured under a policy can make a Nomination.
7
Who cannot nominate?
Non-individuals such as societies, trusts, body corporate, Karta’s of Hindu Undivided Family etc. and holders of power of attorney cannot make a nomination.
8
Who can be a nominee?
Only an individual can be a nominee. A nominee shall not be a society, trust, body corporate, partnership firm, Karta of Hindu Undivided Family or a power of attorney holder.
9
Whom can I nominate?
A nominee could be a family member or a friend or any other person whom you trust.
10
Is it compulsory to nominate family member?
No, it is not compulsory to nominate family member or beneficiary or legal heir. Nominee may or may not be a family member or beneficiary or legal heir.
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11
Can I nominate a minor?
Yes, nomination favouring the minor is permitted on the condition that the account/ locker holder, while making the nomination, appoints another individual (who is not a minor) to receive the monies in the account/ contents of the locker on behalf of the minor. In the event of the death of the account/ locker holder(s), while the nominee is still a minor, the individual who is appointed to receive the monies/ contents will receive the proceeds of the deposit/ contents of the locker claimed on behalf of the minor nominee. Similarly, minor can also be nominated for other assets like shares, insurance policy, post office etc.
12
What details are to be provided about the nominee?
The following details are required to be provided at the time of filling in the proposal or at the time of creating a nomination: Mention the Full Name, Address, age, relationship to yourself of the nominee. If the nominee is a minor, appoint a person who is a major as an appointee giving his full name, age, address and relationship to the nominee. Signatures of appointee as token of consent are necessary on the proposal form. Do not write the nomination in favour of wife and children as a class. Give their specific names and particulars existing at that moment.
13
Can a minor nominate?
No, a minor cannot nominate either directly or through its guardian.
14
Can NRI nominate?
Both resident Indians as well as NRIs can nominate and a nominee can be resident or an NRI.
15
Can a NRI be appointed as nominee?
Yes, a nominee can be a resident Indian or another NRI.
16
Can joint account holders nominate?
Yes, joint account holders are permitted to nominate. In such cases the nomination form must be signed by all account / locker holders. However in case of joint accounts, the nominee’s right arises only after the death of all the holders or depositors.
17
When can nomination be done?
Nomination can be done at the time of proposal in case of insurance policy or while opening an account or at any stage. To nominate, all that is required to be done is to provide the details of the nominee in the proposal or account opening form. If a nomination was not done at the time of filing the proposal, it can be done at any stage before the death or maturity of the account or policy. Precaution be taken that the nomination is recorded in the records and reflected in the documents like nominee register, passbook, statement, policy, certificate.
18
Is it mandatory to nominate family member?
No it is not mandatory to give or make nomination. However, a declaration that “I/ We do not wish to make a nomination� has to be provided in case the holder decides not to make a nomination. Declaration is required to be signed by all the joint holders.
19
Is there a prescribed form for nomination?
Yes, nomination is to be made in a prescribed form according to regulations governing the service provider. Like banks, depository participant, insurance companies, PF authorities have their own prescribed form for making the nomination.
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20
Where can I get a nomination form?
The form is available with the respective service provider.
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Is nomination required to be witnessed?
Yes, any nomination registration, cancellation or change has to be witnessed. The witness needs to furnish his details on the form and sign as having witnessed the nomination. In case a thumb impression is affixed on the nomination form (instead of a signature) the same needs to be witnessed by two witnesses, one of which has to be a bank official and the other an external person (known to the customer
22
What is the procedure for nomination?
Only individuals holding accounts either singly or jointly can make nomination. Non-individuals including society, trust, body corporate, karta of Hindu Undivided Family, holder of power of attorney cannot nominate. The nominee appointed has to be an individual only. It is in the interest of all individual to appoint a nominee for their investments, so that in the event of death, there is little difficulty in transferring the assets. Nomination can be done at the stage of proposal itself or at any stage by submitting the nomination form. Nomination should be registered and recorded in the records like nomination register maintained by the service provider and also reflected in documents like passbook, statement, policy, and certificate.
23
What is the benefit of nomination?
The benefit of nomination is that in the event of death of an account holder(s) or locker holder(s), the Bank can release the account proceeds or contents of the locker to the nominee(s) without insisting upon a Succession Certificate, Letter of Administration or Court Order. Though the provisions in respect of nomination, in each statute may be worded differently, the legal position of a nominee has always been accepted to be that of a trustee and nomination is not considered to be a kind of testamentary succession. The nominee holds the monies in the capacity of a Trustee on behalf of the legal heirs of the deceased account holder(s) or locker holder(s) and the Bank’s liability is duly discharged on payment to the Nominee. Nomination facility, if availed, would ensure smooth settlement of claim to the nominee. Hence, nomination facility is an ideal tool to mitigate hardships of common persons in settlement of claims in the event of death of the account holder. Similarly, in insurance policy, nominee is considered as a trustee who receives the money due under the policy for the benefit of the legal heirs of the deceased. In other words, the fact that a person happens to be mentioned as nominee by the person insured, does not give him the title to the insurance money. Likewise, same position will also be applicable in all other cases like MF holding, society, NSC, post office.
24
What is successive nomination?
Successive nomination means that benefit should be paid to nominee A; failing him, to nominee B; failing whom, to nominee C, etc. Such a nomination is treated in favour of one individual and is acceptable in law.
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25
Can I nominate different individuals for multiple accounts?
Yes, you can appoint multiple nominees such as your parents, your spouse and your children for multiple accounts but each account should have only one nominee. If they are your legal heirs, you can also specify their percentage of share in the policy proceeds. Yes, as mentioned earlier, different individuals can be nominated on different account/lockers held by the same account/locker holders. However separate nomination forms need to be completed for each nominee.
26
Can I make a blanket nomination?
No, as mentioned earlier, each nomination made has to be witnessed (with the date) and each account number must be mentioned on the nomination form. Hence, it is not possible to make a nomination for future accounts, deposits that might be opened under a particular customer record.
27
What would happen if no nomination is made?
In case you do not have a nominee, then the usual personal laws of succession applicable to your family will apply, if there is no will and if there is will then according to Will supported with probate issued by the competent court. In case nomination is not made by the sole account holder, the benefits would be distributed amongst the legal heir(s), in accordance with the applicable laws of succession based on the succession certificate issued by the competent court.
28
How long does my nomination remain in effect?
Nomination is in effect until rescinded or changed.
29
What are basic guidelines to be followed while completing a nomination form?
The account holder(s) need(s) to complete the forms in duplicate, signed by all the account holders. Both copies of the nomination form must bear the account holders’ signatures in original. The number of each account for which nomination is being made must be specifically mentioned in the nomination forms. In case the nomination is being made by joint holders, then in that case all holders must sign the nomination form. If a minor is being nominated on the account, complete details of the guardian should be furnished.
30
How can I register a nomination?
The nomination form duly filled-in should be submitted either at the time of account opening or at the stage of proposal or later. The account holder/proposer, nominee & two witnesses must sign the nomination form and provide details like name, address & two photographs of the nominee. Specific nomination form needs to be completed & submitted to the service provider for registering the nomination facility. Different forms are applicable to register nominations e.g. for deposit accounts, safe deposit lockers, insurance policy, demat account, MF.
31
Can I cancel or change nomination?
Nomination can be cancelled or changed at any stage; by giving signed written notice nomination can be amended or revoked.
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Individual may be required to submit separate prescribed form, as may be applicable for each of the service provider, for cancellation and/or variation of nomination. Under Insurance Laws, there are no restrictions on the policyholder regarding changing his nomination at any point of time, any number of times. The lifeassured is free to change or cancel a nomination and make a fresh nomination any number of times during the currency of the policy. Similarly, in all other cases, nomination can be cancelled or changed at any stage. 32
What is the role of nominee?
The role of nominee under Insurance Act is nothing more than an agent to receive the money due under the life insurance policy. A nominee is like a trustee who basically takes care of the assets left behind by the owner and is obliged under the law to distribute them among the legal heirs of the deceased. In case of Insurance, nominee is a trustee who receives the money due under the policy for the benefit of the legal heirs of the deceased, but has no right over them unless the nominee is also a legal heir. The nominee holds the monies in the capacity of a Trustee on behalf of the legal heirs of the deceased and the liability of the service provide like bank, insurance company is duly discharged on payment to the Nominee. A nomination is not a mode of making a bequest.
33
What are the rights of a nominee over the assets?
A nominee is entitled to receive benefits from the insurance policy, only after the insured’s death. If the insured outlives the term of the policy, the nomination will stand cancelled. A nominee receives the proceeds in their capacity as a trustee for the legal heirs of the insured. The proceeds don’t belong to the nominee unless the nominee is also a legal heir. A nominee is like a trustee who basically takes care of the assets left behind by the owner and is obliged under the law to distribute them among the legal heirs of the deceased. He cannot assume ownership by virtue of the death of the original owner unless he is a legal heir. And even then, he will have to get a succession certificate from the court stating this fact. However, the position of nominee under Section 109A of the Companies Act, has changed and the Bombay High Court has ruled that the rights of a nominee to shares of a company would override the rights of heirs to whom property may be bequeathed.
34
How can nominee claim the benefits?
In the event of death of the account holder, the nominee should contact the service provider and he will be guided accordingly.
35
Will the nomination facility guarantee the transfer of securities to the nominee?
On submission of complete documents as may be required by the service provider, the nominee can claim the benefit that he has been nominated for.
36
How do I ensure my nomination is valid?
Make sure that nomination is registered in the ‘Nomination Register’ maintained by the service provider.
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Commodity Derivatives in India Challenging Tasks Ahead Swati* and Prof.M.B.Shukla, Dean & Director, Institute of Management Studies, Faculty of Commerce & Management Studies, Mahatma Gandhi Kashi Vidyapith, Varanasi.
e-mail : swati_sharma677@rediffmail.com mbshukla.ims@rediffmail.com
Commodity derivatives market in India has come a long way with an impressive growth during the last six years since 2002-03 when the government embarked upon a policy of liberalisation for the commodity market. Commodity derivatives as an industry are poised to take-off and may provide numerous investors in this country with another opportunity to invest and diversify their portfolios. There is hope for greater convergence of markets – equity, commodities, forex and debt – which could enhance the business opportunities for those who have specialised in the futures market.
Indian economy is agriculture based where two-thirds of the population depend on agriculture. With some exception whole family members of the farmers are engaged in farming. These farmers ensure supply of food grains and other important inputs for agriculture based industries. These inputs are sugarcane, cotton, rubber, tea and fruits. In spite of hard work and various risks involved in production of agricultural products and supplying process of essential food grains and important inputs farming community is not getting required dues for improving its well being. Agricultural population needs remunerative price structure for agriculture produce. Minimum support pricing and statutory pricing both have their own limitations for rewarding farmers for their products. Agriculture markets have been in existence in India for centuries, and perhaps for millennium. In earlier days, they need of a market place where they can exchange their produces with other products (which were popularly known as barter system) or money and this leads to the inception of local mandis called spot market. Spot markets are those in which the commodity is traded immediately in exchange for cash or some other goods. But as the country was expanding and spreading, farmers were having a difficult time reaching buyers efficiently. Farmers use to carry tons of goods to hundred of miles, only to have a prospective buyers for a deal. Quarrels repeatedly erupted relating to the quality, quantity, price dissemination etc. A central market place where many willing and able buyers and *Research Scholar in the Department of Commerce, Mahatma Gandhi Kashi Vidyapith, Varanasi.
sellers transacted business was the answer and that has led to inception of commodity market, commodity derivatives and commodity future market. At a later stage, Bullion and other metals, energy and other non-agricultural commodities have also been included in the scope of commodity future market. Actually, derivative is a financial instrument whose characteristics and value depend upon the characteristics and value of an underlier, typically a commodity, bond, equity or currency. Derivatives include futures and options. The Indian economy is witnessing a mini revolution in commodity derivatives and risk management. “The early 20th century saw the mushrooming of a number of commodity Exchanges. The history of organized commodity derivatives in India goes back to the nineteenth century when the Cotton Trade Association started futures trading in 1875, barely about a decade after the commodity derivatives started in Chicago.”1 The principal commodity markets functioning in pre-independence era were the cotton markets of Bombay, Karachi, Ahmedabad and Indore, the wheat markets of Bombay, Hapur (1913), Karachi, Lyallpur, Amritsar, Okara and Calcutta; the groundnut markets of Madras and Bombay; the linseed markets of Bombay and Calcutta; Jute and Hessian markets of Calcutta (1912); Bullion markets of Bombay (1930), Calcutta, Delhi and Amritsar and sugar markets of Bombay, Calcutta, Kanpur and Muzaffarnagar. There were no uniform guidelines or 1. Abhijit Sen Committee Report “Impact of Future Trading on Agricultural Commodity Prices”, Ministry of Consumer Affairs, Food & Public Distribution, Government of India, 2008,p.4
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regulations. These were essentially outcomes of needs of particular trade communities and were based on mutual trust and faith. They were regulated by social control of close-knit groups and whenever such control failed, there would be a crisis. In derivative market, producers hedge against the risk of owing things that are subject to unexpected price fluctuations. Commodity derivatives are now considered one of the basic tools for enhancing the efficiency of commodity markets. The two main reasons for the use of commodity derivatives are the high and variable levels of market volatility and limited ability to adequately manage risk. Derivatives allow investors to manage their risks more effectively, promote price discovery, and increase transactional efficiency. It also allows farmers to manage, predict and control the prices of their produces. The future is uncertain and risky and risk can be eliminated or minimized by the use of commodity derivative instruments. The use of derivatives in market-based economies allows for more efficient allocation of resources, thus investment become more productive, leading to higher rates of economic growth.
be traced back to the need of farmers to protect themselves against fluctuations in the price of their crops. From the time it was sown to the time it was ready for harvest, farmers would face price uncertainty. Through the use of simple derivative products, it is possible for the farmer to partially or fully transfer price risks by locking-in asset prices. It is only in the last decade that commodity future exchanges have been actively encouraged. Earlier, the markets had been thin with poor liquidity and have not grown to any significant level. However, there is growing interest and improved liquidity in commodity future exchanges. A future contract is a commitment to buy or sell commodities at a specified time and place in the future. “A commodity future, which is an essential component of commodity derivative, can be broadly classified into precious metals, agriculture, energy and other metals. Future trading in commodities results in transparent and fair price discovery on account of large scale participation of entities associated with different value chains.”2 It reflects videos and expectations of wider section of people related to a particular commodity. It also provides effective platform for price risk management for all segment of players ranging from producers, traders and processors of a commodity because its activities are conducted in exchange based platform. It also helps in improving the cropping platform for farmers, thus minimizing the losses to the farmers because risk and uncertainty are inescapable factors in agriculture. Farmers face production risk from the weather, pests, diseases and natural calamities, which affect the yield of crops directly. They also face price or market risks, where adverse movements in market price of commodities produced by them causes unforeseen losses irrespective of the level of yield. Other risks such as institutional and personal or human risks also impact farmers’ productivity and profitability and commodity future exchange provides price signals to producers and consumers based on which they meet their long term requirements. These price signals are not available to the users unless there is a commodity futures exchange and in its absence, the markets have large price fluctuations. This is not in the interest of the producers and consumers. Price stabilization comes from the price discovery process when market participants react positively to the information available to decide a price.
Derivatives as a Risk Aversion Tool Agricultural producers and farmers are prone to several risks such as price, crop and weather/climatic variations and a plethora of other natural disasters, which could be devastating to their anticipated income and could have negative effects on the standard of living, ability to build capital and ability to access credit and repay debts. Commodity derivatives were first created for farmers, to offer them protection against crop values falling below the cost of growing the crop. This protection comes in the form of derivative contracts, and these contracts cover commodities such as white pepper, wheat, rice, coffee, cotton, and many others. But now it is also being extended to non-agricultural commodities. Commodity derivatives started out as the first risk management option for commodities, but presently they become an important investment tool. Commodity derivatives are now commonly invested in by investors who have nothing to do with agriculture, or who do not need the actual commodity. Investors in commodity derivatives speculate on which direction commodity prices will take, making money if the price moves towards their favour. The commodity market and commodity derivatives allow investors to put their money in commodities without having to actually take possession of the commodity. Usually commodity derivatives are used to make money on the commodity without taking deliveries. These instruments allow investors to invest in commodities, instead of companies. So, the origin of derivatives in agriculture can
In commodity market no risk can be eliminated, but the same can be transferred to someone who can handle it better or to someone who has the appetite for risk. Commodity primarily faces the different classes of risk viz., the price risk, quantity risk, yield/output risk and political risk. 2. Kabra Kamal Nayan, “Commodity Futures in India”, Economic and Political Weekly, Vol , No , 2007, pp 1163-1170,
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General feeling in commodity exchanges that the risk of the counter party not fulfilling its obligations on due date or at any time is the most common risk. “This risk is mitigated by collection of the margins viz., initial margins, exposure margins, mark to Market on daily positions and surveillance.”3
Commodity Future Market in India India has a long history of future trading in commodities. In India, trading in commodity future has been in existence from the 19th Century as stated earlier with organised trading in Cotton, through the establishment at Bombay Cotton Association Ltd. in 1875. “Over a period of time, other commodities were permitted to be traded in Future Exchanges. Spot trading in India occurs mostly in regional mandis and unorganized market, which are fragmented and isolated. There were booming activities in these markets at one time as many as 100 unorganised exchanges were conducting forward trade in various commodities.”4 The securities market was a poor competitor of this market as there were not many papers to be traded at that time. However, many feared that derivatives fuelled unnecessary speculation and were detrimental to the healthy functioning of the market for the underlying commodities. As a result, after independence, commodity option trading and cash settlement of commodity future were banned in 1952. A further blow come in 1960’s when following several years of several droughts has forced many farmers to default on forward contract and even caused some suicides, forward trading was banned in many commodities considered primary or essential. Consequently, the commodities derivatives market dismantled and remained dormant for about four decades. After Independence, the Parliament passed Forward Contracts (Regulation) Act, 1952 which is regulating forward contracts in commodities all over India. The Act applies to goods, which are defined as any movable property other than security, currency and actionable claims. The Act prohibited options trading in goods along with cash settlements of forward trades, rendering a crushing blow to the commodity derivatives market. “Under the Act, only those associations/ exchanges, which are granted recognition by the Government, are allowed to organize forward trading in regulated commodities.”5 “For a commodity to be suitable for futures trading it must possess the following characteristics:-”6
(i) The commodity should have a suitable demand and supply conditions i.e. volume and marketable surplus should be large. (ii) Prices should be volatile to necessitate hedging through futures trading in this case persons with a spot market commitment face a price risk. As a result there would be a demand for hedging facilities. (iii) The commodity should be free from substantial control from Govt. regulations (or other bodies) imposing restrictions on supply, distribution and prices of the commodity. (iv) The commodity should be homogenous or, alternately it must be possible to specify a standard grade and to measure deviations from that grade. This condition is necessary for the futures exchange to deal in standardized contracts.
Modern Commodity Exchanges To make up the loss of growth and development during the four decades of restrictive government policies, Forward Market Commission and the government encouraged the setting up of commodity exchanges using the most modern system and practices in the world. Some of the main regulatory measures imposed by the FMC include daily market to market system of margins, creation of trade guarantee fund, back office computerization for the existing single commodity exchanges, online trading for the new exchanges, demutualization for the new exchanges and one third representation of independent directors on the board of existing exchanges etc. At present 6 National Level Commodity Exchanges in India are working. These are: (i) National Multi Commodity Exchange of India (NMCE), (ii) National Commodity Derivatives Exchange Ltd.: (NCDEX), (iii) Multi Commodity Exchange of India Ltd.(MCX), (iv) Indian Commodity Exchange Ltd(ICEX), (v) Ahmedabad Commodity Exchange(ACE), (vi) Universal Commodity Exchange, Mumbai (UCE).
4. Narendra L. Ahuja “Commodity Derivatives Market in India: Development, Regulation and Future Prospects” Euro (2006),p.8
Development of commodity exchanges in the country is becoming a continuous affair. “The new exchanges brought capital, technology and innovation to the market. These markets notched up phenomenal growth in terms of number of products on offer, participants, spatial distribution and volume of trade.”7 “Recently, Gontermann Peipers (India), promoted by Pramod Mittal of the Ispat group, placed an application with the Forward Markets Commission (FMC) for setting up a national commodity exchange. However, the government has decided to cap the number of national commodity exchanges in consultation with the sector regulator, FMC and allowed only eight commodity exchanges to function at the national level.”8
5. Ibid.p.10
7. Ibid, p.8
6. op.cit- Abhijit Sen Committee Report, p.8
8. Business Standard, Sept.11, 2010
3. Shiv S. Srivastava, “Commodity Market in India: An Overview”, Well India, 2009,p.8
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It is feeling of the FMC that the mushrooming of national commodity exchanges would not be a good sign, as quality growth is more necessary than just having a mere number of exchanges.
Expanding Horizon of Commodities included for Derivatives
Efficient functioning of future markets presupposes the existence of efficient spot markets. Currently, the physical spot markets have large number of infirmities. Till these infirmities are removed, there will be difficulties in the functioning of futures markets. Futures markets can act as a catalyst of change for spot markets. But whenever futures markets try to grow faster than the under developed physical spot markets of underlying commodities, disconnect between the two gets widened thereby exposing the futures market to criticism of being driven by speculators, even if closely regulated. Efficient spot markets would require integration of spot markets which requires development of rural communication, transport and storage infrastructure.
Derivatives segment indicates an expanding horizon of different commodities. “In January 2005, 59 commodities were included in derivatives segment which increased to 94 commodities in the commodities futures market as of December 2006. These commodities include major agricultural commodities (rice, wheat, jute, gur, cotton, coffee, major pulses like urad, arahar, chana, edible oilseeds like mustard seed, coconut oil, groundnut oil and Development of Commodity Futures sunflower), spices (pepper, chillies, cumin seed and turmeric), metals (aluminium, tin, nickel and copper), bullion (gold and “Agricultural commodities constituted a significant proportion silver), crude oil, natural gas and polymer, among others.”9 Several of total value of trade till 2005-06. This place was taken over new commodities were permitted for trading in 2008, such as by Bullion and other Metals in 2006-07. Further, there has aviation turbine fuel, carbon credit, carbon financial instrument, been a fall in agri-commodity volumes during 2007-08 over red arecanut, coriander seeds, garlic, steel long (ingots/ billets) the 2006-07. Negative sentiments have been created by the and thermal coal. Some more new commodities were introduced decision to de-list futures trade in some important agricultural for futures trading in 2009, such as almond, imported thermal commodities.”11 “During the year 2009-10(up to December coal, and platinum. It is also important to note that “the growth 2009), value of trade in agricultural commodities was about in commodity futures trade has spawned an upsurge of interest in 16.33 per cent. Agricultural commodities, however, accounted a number of associated fields, viz. research, education and training for 38 per cent of the total volume of trade.”12 In value terms, activities in commodity markets, commodity reporting for print bullion accounted for the maximum share of commodity and visual media, collateral management, commodity finance, groups followed by energy and metals. It means various ware-housing, assaying and certification, software development, delisting of agri commodities was responsible for the poor electronic spot exchanges etc. Markets and fields almost non- growth of the poor trading of agri commodities. De-listing existent four years ago now attract significant mind-share nationally has adversely affected market sentiment regarding futures and internationally. One of the benefits of futures market is that trading more generally; this must be because of the “go-stop” it discovers the prices of commodity in advance thereby helping nature of government policy on the matter. Overall position the farmers to take planting /sowing decisions. These signals are has been analysed in exhibit-1. now available to the farmers at the futures platform.”10 Exhibit-1 Group-wise Value of Trade in Commodity Futures Market (Amount in lakh crore) Nature of the Commodity
2005-06
2006-07
2007-08
2008-09
2009-10
Agriculture Commodities
11.92
13.17
9.41
6.27
9.02
(55.31)
(35.82)
(23.15)
(11.95)
(16.33)
7.79
21.29
26.24
35.92
33.88
(36.15)
(57.90)
(64.55)
(68.44)
(61.31)
1.82
2.31
5.01
10.26
12.33
(8.45)
(6.28)
(12.30)
(19.56)
(22.30)
Bullion & Other metals Energy
9. Economic Survey, 2006-07, p.81-82
11. Ibid, p.7
10. op.cit- Abhijit Sen Committee Report, p.6
12. Economic Survey, 2009-10, p.207
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Others Total
0.02
0.001
0.00
0.02
0.03
(0.09)
(0.00)
(0.00)
(0.05)
(0.06)
21.55**
36.77**
40.66**
52.47**
55.26**
(100.00)
(100.00)
(100.00)
(100.00)
(100.00)
*figures in bracket represent percent from the total ** Absolute figures are converted in lakh crores Source: (i) Abhijit Sen Committee Report for 2005-06 and 2006-07 (ii) Economic Survey, 2009-10 for 2007-08 to 2009-10 During the year 2006-07 the share of agricultural commodities in total value of commodities was 35.82 percent as compared to 55.31 in 2005-06. “Percentage of bullion and other metals comes to 36.15 percent and 57.90 percent in 2005-06 and 2006-07 respectively. The growth in 2006-07 was almost wholly (88.7%) accounted for by bullion and metals, with agricultural commodities contributing a small fraction (10.7%).”13 This was partly due to the stringent regulations, like margins and open interest limits, imposed on agriculture commodities and the dampening of sentiments due to suspension of trade in few commodities. Futures market growth in 2006-07 appears to have bypassed agriculture commodities. Four commodities (wheat, rice, urad and tur) were de-listed for futures trading towards the end of financial year 2006-07. This de-listing has been held responsible in many circles for the general downturn in futures trading in agricultural commodities. “But these four de-listed commodities together accounted for only 6.65% of the total value of futures trading in all agricultural commodities in 200607.”14 Thus, although this may have affected market sentiments adversely, the delisting did not have any major direct contribution to the decline in trading observed during 2007-08. During the year 2008-09, the value of trade in agricultural commodities was about 12 per cent of total value of trade. Bullion and other metals accounted for the maximum share of the commodity groups to the total value of trade during 200809 (April-March) at 68.44 per cent followed by energy at 19.56 per cent. Agricultural commodity futures staged a remarkable recovery in 2009-10, displaying an increase of 43 per cent over the 2008-09.
Volume of Trades in Commodity Markets The growth of commodity derivative trading was quite phenomenal in 2005-06. It continued during 2006-07. The growth in the volume of trading has been primarily propelled by Multi Commodity Exchange, Mumbai (MCX) and National Commodity Derivatives Exchange, Mumbai (NCDEX). These two exchanges are also accounted for a large number of
contracts traded on the exchanges. The daily average value of trade in the commodity exchanges improved from Rs. 13,000 crore during 2006-07 to Rs. 15,000 crore in 2007-08. While the commodities traded at the exchanges included major agricultural commodities, the major share of the turnover was accounted for by spices, crude oil and natural gas. The total volume of trade in the commodity futures market rose from Rs. 34,84,485 crore in 2006-07 to Rs. 36,54,487crore in 200708, notwithstanding the suspension of trading of wheat, rice, urad and tur. Total value of trading in the commodity futures market rose from Rs. 36,54,487crore in 2007-08 to Rs. 50,33,884crore during 2008-09. The average daily value of trades in the commodity exchanges improved from Rs. 15,000 crore during 2007-08 to Rs. 16,400 crore in 2008-09. Agricultural commodities, bullion and energy products accounted for a large share of the commodities traded in the commodities futures market. “The MCX recorded the highest turnover in terms of value of trade during 2008-09, followed by National Commodity & Derivatives Exchange Ltd. (NCDEX) and National MultiCommodity Exchange of India Ltd. (NMCE) respectively. The MCX commodity index fell by 24.7 per cent during 200809.”15 The decline in international commodity futures indices viz., Dow Jones AIG Commodity Index (DJAIG) and Reuters/ Jefferies Commodity Research Bureau (RJCRB) index was even sharper at 36.6 per cent and 36.0 per cent respectively. It is notable that direct participation of the farmers in the commodity futures markets is somewhat difficult at this stage. Large lot size, daily margining, high membership fees, etc., work as deterrent for farmers’ participation in these markets. Farmers can directly benefit from futures market if institutions are allowed to act as aggregators on behalf of farmers. During 2007-08, 43 awareness programmes were organized exclusively for the farmers. The awareness programmes are designed to make farmers aware of the benefits of the futures market and to utilize the price signals emanating from the futures exchanges in taking various decisions. FMC undertook
13. op.cit- Abhijit Sen Committee Report, p.8 14. Ibid.p.8
15. Economic Survey, 2008-09, p.198
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various regulatory measures to facilitate hedgers’ participation and promote delivery in agricultural commodities, such as introduction of the Exchange of Futures for Physicals (EFP) and Alternate Futures Settlement Mechanism, allowing higher position limits to NAFED to facilitate hedging and delivery by it and introduction of an early delivery system in select commodities. In addition, efforts have also been made to develop an “aggregation� model in collaboration with commodity exchanges to promote participation of farmers. Major policy developments initiated by the Forward Markets Commission included the issuance of guidelines for bringing members of the commodity exchanges under the purview of the Money Laundering Act and guidelines for divestment of
the equity by the existing national exchanges after five years of their operation. A price dissemination project was initiated by the FMC, under which spot and future prices of agricultural commodities would be made available to farmers on a realtime basis on price ticker boards placed at Agricultural Produce Marketing Committees. The total value of trades in the commodity futures market rose from 50,33,884 crore in 200809 to Rs 70,90,456 crore during 2009-10. The average daily value of trades in the commodity exchanges improved from Rs 16,400 crore during 2008-09 to Rs 23,200 crore in 200910. Agricultural commodities, bullion and energy accounted for a large share of the commodities traded in the commodity futures market.
Exhibit-2 Turnover on Commodity Futures Markets (Rs crore) Name of the Exchange
2005-06
2006-07
2007-08
2008-09
2009-10
Multi Commodity Exchange (MCX), Mumbai
6,33,324
20,25,663
27,30,415
42,84,653
59,56,656
National Commodity and Derivatives Exchange (NCDEX)
10,66,686
1,11,462
7,74,965
6,28,074
8,05,720
National Multi Commodity Exchange, (NMCE)
12,107
12,43,327
25,056
37,272
1,95,907
Others
1,08,705
1,04,033
1,24,051
83,885
1,32,173
Total
16,37,345
34,84,485
36,54,487
50,33,884
70,90,456
Source: Ministry of Consumer Affairs *Up to Dec.2009 The MCX, Mumbai, recorded the highest turnover in terms of value of trade during 2009-10 with 59,56,656 crore followed by the National Commodity & Derivatives Exchange Ltd.(NCDEX) with 8,05,720 crore and 1,95,907crore by National Multi Commodity Exchange of India Ltd.(NMCE) respectively. There is a rising trend in the turnover of MCX from 2007-08 to 200910. MCX ranks among the worlds top ten commodity exchanges. MCX holds first rank in Silver trading, second in Gold, Copper & Natural Gas and third in Crude Oil all over the world. There has been a significant decline in volume of futures trade in agricommodities during 2008-09 in NCDEX and that is the reason why the volume of trade declined by Rs.1, 46,891crore in 200809 for NCDEX. But the market for NCDEX again recovered and maintained it on Rs.8,05,720 crore. The NMCE situated at Ahmedabad has improved its turnover on commodity future market. By dealing in agri and non agri products, NMCE increased its turnover to 1,95,907 crore in 2009-10 from 25,056 crore in 2007-08. The turnover of the other commodity exchanges are also increasing in comparison with 2008-09.
The Committee appointed earlier by the Government of India under the chairmanship of Prof. Abhijit Sen, Member, Planning Commission, to study the impact of futures trading, if any, on agricultural commodity prices submitted its report on April 29, 2008. The Committee opined that the negative sentiments had been created by the decision to delist futures trades in some important agricultural commodities. However, there was no clear evidence of either reduced or increased volatility following opening of futures markets to trading in some agricultural commodities. The vibrant agriculture markets including derivatives markets could provide an early sign of future prospect of the sector.
Expanding Role of FMC The Forward Market Commission has adopted its proactive approach towards regulation and development of the commodity markets. The FMC is trying to give special emphasis on creating awareness among the participants in physical markets including volume and number of contracts. On January 30, 2008, Foreign
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Direct Investment (FDI) up to 26 per cent and FII investment up to 23 per cent (subject to no single investor holding more than 5 per cent) were allowed in Commodity Exchanges. An Ordinance has been issued on January 31, 2008 empowering FMC into an independent regulatory body. “Moreover, the Cabinet has already cleared necessary amendments to the Forward Contracts (Regulation) Act, giving autonomy to the FMC and including various provisions aimed at developing the market. But the amendments to the Act will become effective after the Bill is passed by both Houses of Parliament, approved by the President and notified in the Gazette.”16 During 2007-08 the FMC had initiated a process of dissemination of futures and spot prices at various mandis, post offices, rural branches of commercial banks and other areas frequented by participants including farmers. Dissemination of price information is expected to help such participants to cover their price risk in their pre-sowing and post-harvest decisions. FMC in association with the various State Governments, agricultural universities, academic institutions, NGOs, commercial banks, and others, has been organizing the awareness/training programmes exclusively targeted at farmers. The Commission has also been working on various models of aggregation to enable the farmers to hedge on the commodity exchanges to manage their price risk. The FMC has also issued guidelines for the constitution of the Board of Directors and appointment of Chief Executive and Chief Compliance Officer in the Commodity Exchanges and grant of recognition to new Commodity Exchanges under the provisions of the Forward Contract Regulation Act 1952. Necessary directions have also been made to the National exchanges regarding fixation of the transaction charges and to restrict the use of multiple client codes by a single client so as to make the violation of regulatory provisions more difficult. Daily price limits of international commodities were raised to 9 per cent and the exchanges were directed to ensure that no client was allowed to trade without having Unique Identification Number.
Suggestions The following suggestions are required to be implemented to make the commodity derivatives market more effective and viable: (i) Industry status should be granted to commodity derivatives sector so that the players, like their counterparts in securities industry, can have access to the institutional funds for their working capital. (ii) Infrastructure requirements like warehousing facilities, clearing house and modern trading ring should be developed, improved and strengthened in order to ensure simple working behaviour of the commodity exchanges. 16. Business Standard, Nov11, 2008
(iii) Commodity exchanges should be promoted as professional bodies with high degree of self-regulation as the first tier regulator. In order to instill confidence in investors, increasing volumes and thereby achieving the full benefits of futures trading these organisations have to be mature enough by adapting best practices. (iv) Necessary amendments should be undertaken in the Forward Contract Regulation Act for permitting futures in intangible commodities like commodity indices, weather derivatives and options trading as options are a cheaper instrument for hedging the risk in commodities for business, be it a trader or farmer or user. (v) A massive awareness programme should be formulated by the Forward Market Commission and the Commodity Exchanges to make the potential beneficiaries aware about the benefits and risks of futures trading. Futures prices should be disseminated widely so that stakeholders can take informed decisions. Commodity derivatives market in India have come a long way, with an impressive growth during the last six years since 200203 when the government embarked upon policy liberalisation for commodity market. “During this small yet remarkable journey, commodity exchanges have also crossed several policy hurdles to grow in stature equivalent to their international counterparts, seamlessly integrating with the entire financial markets architecture. They also did help in spreading risks in major commodities ecosystems across several stakeholders thereby making the economy more competitive in the current rapidly globalising world.”17 Being online with extended hours of operation, these modern commodity exchanges have also enabled the Indian industry to manage risks as they flow from their origins crossing economic borders. Options contracts in commodities are being considered and this would again boost the commodity risk management markets in the country. There may be increased interest from the international players in the Indian commodity markets once national exchanges become fully operational. “Commodity derivatives as an industry are poised to take-off which may provide the numerous investors in this country with another opportunity to invest and diversify their portfolios.”18 There is hope for greater convergence of markets – equity, commodities, forex and debt – which could enhance the business opportunities for those who have specialised in the above markets. Such integration would create specialized treasuries and fund houses that would offer a range of services to provide comprehensive risk management solutions to India’s corporate and trading community. Now there is every hope that we can witness better tomorrow for our participants in commodity market. 17. Commodity Insight Yearbook, Price Water House Cooper & MCX Publications, 2009, p.12 18. Ibid.p.12
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Corporate Laws production or within 60 months of the date of the JVA, whichever was later, at least 60% of the shareholding of the WBIDC would be offered to CP (M) C at Rs.14/- per share.
LW 120.11.2011 CHATTERJEE PETROCHEM (I) PVT LTD v. HALDIA PETROCHEMICALS LTD. & ORS. [SC] Civil Appeal Nos.5416-5419 of 2008 with Civil Appeal Nos.5420, 5437-5440 of 2008 Altamas Kabir & Cyriac Joseph, JJ.[Decided on 30/09/2011] Companies Act, 1956 – Sections 397, 398 and 402 – Private agreements between parties to invest in the company which included transfer shares by one party to another – Non lodging of share certificates by transferor with the company – CLB directing the performance of the agreements by the parties – Whether tenable – Held, No.
It was provided that the role of the Government in the Company would be limited to its promotion and guidance through the initial phases of the project and that the nominee of CP (M) C would be the Managing Director.
The project started in 1997 and commercial production commenced in August, 2001. Thereafter, further agreements were entered into between the parties, the relevant conditions which are as under:
The Government of West Bengal, WBIDC and HPL, inter alia, agreed on a certain course of action in regard to HPL’s need of financial and managerial restructuring under which CP (M) C would acquire a controlling interest of 51% shares in the equity of the Company and would have complete control over the day-to-day affairs of the Company, including the right to appoint key executives.
Brief facts: Series of agreements were entered into between WBIDC, Tatas and the Chatterjee Petrochem (Mauritius) Company (CP (M) C) with respect to Haldia Petrochemicals Ltd (HPL). The understanding reached out through these agreements by the parties is as under:
Equity capital of Rs.700 crores was to be contributed by WBIDC, CP (M) C and the Tatas in the ratio of 3:3:1 respectively.
The Board of the Company would consist of four nominees each of WBIDC, CP(M) C and two from the Tata group.
WBIDC would vote along with CP (M) C on all issues in the shareholders meeting and its nominee would also vote along with the nominee Directors of the CP (M) C.
All other rights and obligations of CP (M) C in terms of the earlier agreement would continue till CP(M)C acquired majority shares in the Company.
It was recorded that 155,099,998 equity shares of WBIDC had been transferred and delivered to CP(I)PL, on 8th March, 2002 and the said shares were pledged with WBIDC and, accordingly, the shares had been duly lodged along with the share certificates with WBIDC and the pledge had been acknowledged.
The collective shareholding of the Appellants was shown to be 58.62% with a rider that 155 million shares transferred by WBIDC to CP(M)C was subject to registration and lenders’ approval. We may have recourse to refer to some of the said agreements at a later stage.
It was decided that both WBIDC and CP(M) C would invest Rs.300 crores each and the Tatas would invest Rs.100 crores, while Rs.500 crores was to be obtained from the public, including Non-Resident Indians and Financial Institutions, towards equity, keeping the debt equity ratio at 2:1. In case of disinvestment by WBIDC, the disinvested shares would be offered to CP (M) C.
The parties would be entitled to seek specific performance of the terms and conditions of the agreement in accordance with the provisions of the Specific Relief Act, 1963, and the agreement would remain in force as long as the parties held the prescribed percentage of shares.
Between 24 months of commencement of commercial
In the months of January and February, 2005, HPL had approved the issuance and allotment of equity shares worth
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Rs.150 crores at par to Indian Oil Corporation (IOC). Objecting to the proposed allotment of shares to IOC and also on the ground that WBIDC and the Government of West Bengal had failed to fulfil their commitment to transfer their balance 36% shares to the Appellants, the Appellants filed Company Petition before the Company Law Board, contending, inter alia, as under:
PC had to rejuvenate the Company and to implement the project and there was a clear understanding that the Chatterjee Group would have management interest in the Company.
The Company was really a quasi-partnership with each of the three groups having financial stakes and management participation.
The Memorandum of Understanding not only provided for the Appellants to hold 3/7th of the shares of the Company, but also 2/5th of the Directorship therein. WBIDC was also to have a 3/7th share in the Company so that the Company remain as a private company.
The Chatterjee Group had been given a right of preemption to acquire the shares of WBIDC if it chose to disinvest its shares.
At the time of entering into a Memorandum of Understanding it had been clearly understood between the parties that the Company would remain in the private sector.
The decision to allot 150 million shares to IOC by WBIDC/GoWB had been taken behind its back with the sole intention of preventing the Chatterjee Group from acquiring the control of the Company’s affairs.
Had the said shares been registered in the name of the Chatterjee Group, the total shareholding of the Chatterjee Group would have been 51% which would have given them control of the affairs of the Company.
The Company Petition was disposed of by the CLB as under; The decision of the Company to allot 150 million shares to IOC was upheld.
The transfer of 155 million shares by WBIDC to the Chatterjee Group at Rs.10/- per share was confirmed.
A further direction was given to GoWB and WBIDC to transfer the 520 million shares held by them in HPL to the Chatterjee Group.
The Chatterjee Group was also directed to purchase the 271 million preference shares held by GoWB and WBIDC at par.
The CP (I) PL was directed to pay a sum of Rs.125 crores to WBIDC towards balance consideration for the 155 million shares on or before 28th February, 2007.
It was further directed that on payment of the said amount, the shares in question would be deemed to have been dematerialized and transferred in the name of CP(I)PL, without any further deed or act or refusal from anyone or production of any instruction to transfer.
The Chatterjee Group was also given liberty as soon as they paid the consideration for the 155 million shares, to take control of the day-to-day management of the Company as they would then be holding 51% of the equity shares, with the stipulation that no major decisions would be taken without the approval of the Court.
The CLB also came to a definite finding that the 150 million shares allotted to IOC had not been so transferred suddenly or surreptitiously or with any ulterior motive and the allegation of a secret agreement between GoWB and IOC, though of very little significance, has been magnified by the Chatterjee Group in the Company Petition.
The Government of West Bengal filed an appeal before the Calcutta High Court, inter alia, on the following grounds:
Despite having received payment in respect of 155 million shares and having transferred the same to the Chatterjee Group, it did not complete the transfer by registering the transfer with the Company and altering its Register of Members accordingly, which effectively deprived the Chatterjee Group of having the promised majority shareholding in the Company.
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Whether CLB could have assumed jurisdiction on the Company Petition filed by Chatterjee Petrochem (Mauritius) Ltd. Co., Winstar India Investment Company Ltd., India Trade (Mauritius) Ltd. and Chatterjee Petrochem (India) Pvt. Ltd., to enforce rights under private contracts.
CLB had erred in applying the doctrine of legitimate expectation in a Petition under Section 397 read with Sections 398 and 402 of the Companies Act, 1956, and in treating the Company to be a quasi-partnership.
Whether CLB has jurisdiction to convert the Company Petition into a Suit for Specific Performance of Contract.
The issues raised in the Company Petition were with regard to the disputes of a contractual nature between shareholders and the non-performance of such contracts between the shareholders could not be treated to be the “Affairs of the Company”. (LW - 133) NOVEMBER 2011
Chatterjee Petrochem (India) Pvt. Ltd. has no locus standi to maintain a petition under Section 398 of the Companies Act since on the date of filing of the Petition before the CLB, the said Company was not even a member of the Joint Venture Company.
Upon hearing the parties, the learned Single Judge held as under:
CP(I)PL had no locus standi to maintain a petition under Section 397 of the Companies Act and that CLB could not have assumed jurisdiction on the Company Petition, in which CP(I)PL was a petitioner, since CP(I)PL was not a member of HPL.
Such a petition for the purpose of enforcing rights under private contracts would not be maintainable and that the agreement entered into between CP (I) PL and WBIDC for transfer of shares, being a private contract between two shareholders, the same could not be the subject matter of a petition under Section 397 of the Companies Act, 1956.
Such agreements could not be treated to be “affairs of the Company” and that, in any event, such a ground had not also been pleaded in the Company Petition.
The order of the CLB, which was based entirely on the question of transfer of the 155 million shares by WBIDC to CP (I) PL, stood vitiated by such jurisdictional error.
The CLB was not justified in applying the concept of quasi- partnership, which had been urged on behalf of the Chatterjee Group, to HPL.
From the entire pleadings in the Company Petition no case whatsoever had been made out that in conducting the affairs of HPL, the GoWB and WBIDC had oppressed the Petitioners in any way so as to attract the provisions of Section 397 of the Companies Act.
The CLB was not right in applying the doctrine of legitimate expectation to the agreement entered into between WBIDC and CP (I) PLand thereby converting the Company Petition into a suit for specific performance of contract.
By granting relief in the name of the doctrine of legitimate expectation, the CLB has actually enforced specific performance of the contract and agreements, which was beyond its jurisdiction.
Aggrieved by the decision of the High Court, the appellants appealed to the Supreme Court of India. Decision: Appeal dismissed. Reason: The case of the Chatterjee Group is woven around
two particular issues, namely, that it had been induced to invest in HPL so as to make it a successful commercial enterprise on the promise that the Company would always retain a private character and the Chatterjee Group would have control over its management, but such a promise had not been adhered to and, on the other hand, negotiations were undertaken by WBIDC to induct IOC, a Central Government Company, with the intention of ultimately handing over the management of the Company to IOC. The aforesaid case of the Chatterjee Group is also based on the grievance that while keeping the Chatterjee Group under the impression that it intended to ensure that the Chatterjee Group had the requisite number of shares to allow it to have a majority shareholding and thereby control of the Company’s management, the Company carried on clandestine negotiations with WBIDC to transfer all the shares held by it in the Company to IOC to give it management and control over the Company’s affairs. The second ground, as made out by the Chatterjee Group, was that despite having transferred 155 million shares in favour of CP(I)PL on 8th March, 2002, it did not register the same in the name of CP(I)PL, which remained the beneficial owner, the right to vote on the basis thereof remained with WBIDC. This was done despite the fact that the price for the said shares had been received by way of a private arrangement and the Lenders and financial institutions had given their consent to the same. According to the Chatterjee Group, this one act of omission on the part of the Company was sufficient to attract the provisions of Section 397 of the Companies Act and for the CLB to pass appropriate orders on account thereof. It is on account of the second ground on which the Company Petition was filed that a prayer had been made therein for a direction upon WBIDC and IOC to immediately register the transferred 155 million shares in the name of CP (I) PL. From the facts as revealed, it is clear that when Dr. Purnendu Chatterjee expressed his interest in setting up of the Haldia Petrochemicals Ltd., various incentives had been offered to him by the GoWB and WBIDC to invest in the Company and to make it a successful commercial enterprise. Such investments were, however, contingent upon Dr. Chatterjee’s bringing in sufficient equity to set up and run the Company. As would be seen, at the very initial stage all the understanding between Dr. Chatterjee and GoWB & WBIDC, both WBIDC and the Chatterjee Group were to hold 433 million shares each, while Tata was to hold 144 million shares. The promise extended by WBIDC and GoWB to the Chatterjee Group to provide at least 60% of the shares held by WBIDC at Rs.14/per share to the Chatterjee Group so as to give the Chatterjee Group the majority shareholding in the Company, as was indicated in the Agreements dated 12th January, 2002, 8th
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March, 2002 and 14th January, 2005, did not ultimately materialise and, on the other hand, the Chatterjee Group was reduced to a minority on account of its decision not to participate in the Rights Issue, and, thereafter, by transfer of 150 million shares by WBIDC in favour of IOC. Although, the Chatterjee Group has complained of the manner in which it had been reduced to a minority in the Company, it is also obvious that when the Company was in dire need of funds and the Chatterjee Group also promised to provide a part of the same, it did not do so and instead of bringing in equity, it obtained a loan from HSBC through the Merlin Group, which only increased the debt equity ratio of the Company. Furthermore, while promising to infuse sufficient equity in addition to the amounts that would have been brought in by way of subscription to the Rights Issue, the Chatterjee Group imposed various pre-conditions in order to do so, which ultimately led GoWB and WBIDC to terminate the agreement to transfer sufficient number of shares to the Chatterjee Group to enable it to have complete control over the management of the Company and also to retain its private character. It is at a stage when there was a threat to the supply of Naphtha, which was the main ingredient used by HPL for its manufacturing process, that it finally agreed to induct IOC into the Company as a member by transferring 150 million shares to it. It may not be out of place to mention that it was on Dr. Chatterjee’s initiative that it had been decided to induct the IOC as a member of the Company at meetings of the Directors which were chaired by Dr. Chatterjee himself. Of course, as explained on behalf of the Chatterjee Group, even the induction of the IOC as a member of the Company is concerned, was part of a conspiracy to deprive the Chatterjee Group of control of the Company since GoWB and WBIDC never intended to keep its promise regarding transfer of at least 60% of its shareholdings in favour of the Chatterjee Group. Such a submission has to be considered in the context of the financial condition of the Company and the response of the Chatterjee Group in meeting such financial crunch. In our view, if in the first place, the Chatterjee Group had stood by its commitment to bring in equity and had subscribed to the Rights Issue, which was a decision taken by the Company to infuse equity in the running of the Company, it would neither have been reduced to a minority nor would it perhaps have been necessary to induct IOC as a portfolio investor with the possibility of the same being converted into a strategic investment. The failure of WBIDC and GoWB to register the 155 million shares transferred to CP (I) PL could not, strictly speaking, be taken to be failure on the part of the Company, but it was the failure of one of the parties to a private arrangement to abide by its commitments. The remedy in such a case was not
under Section 397 of the Companies Act. It has been submitted by both Mr. Nariman and Mr. Sarkar that even if no acts of oppression had been made out against the Company, it would still be open to the learned Company Judge to grant suitable relief under Section 402 of the Act to iron out the differences that might appear from time to time in the running of the affairs of the Company. No doubt, in the Needle Industries case, this Court had observed that the behaviour and conduct complained of must be held to be harsh and wrongful and in arriving at such a finding, the Court ought not to confine itself to a narrow legalistic view and allow technical pleas to defeat the beneficial provisions of the Section, and that in certain situations the Court is not powerless to do substantial justice between the parties, the facts of this case do not merit such a course of action to be taken. Such an argument is not available to the Chatterjee Group, since the alleged breach of the agreements referred to hereinabove, was really in the nature of a breach between two members of the Company and not the Company itself. It is not on account of any act on the part of the Company that the shares transferred to CP (I) PL were not registered in the name of the Chatterjee Group. There was, therefore, no occasion for the CLB to make any order either under Section 397 or 402 of the aforesaid Act. In our view, the appellants have failed to substantiate either of the two grounds canvassed by them for the CLB to assume jurisdiction either under Section 397 or 402 of the Companies Act, 1956, and it could not, therefore, have given directions to WBIDC and GoWB to transfer 520 million shares held by them in HPL to the Chatterjee Group and the High Court quite rightly set aside the same and dismissed the Company Petition. Consequently, all the appeals are dismissed. Having regard to the peculiar facts of the case, the parties shall bear their own costs.
LW 121.11.2011 IN RE: RECKITT BENCKISER (INDIA) LTD [DEL] C.P. 228/2010 & C. A. 1008/2010 & 2486/ 2010 Manmohan, J. [Decided on 03/10/2011] Companies Act, 1956 – Sections 100, 101, 102, 103, 104, 105 – Reductipon of capital – Objections on policy of the Government etc. – Whether tenable – Held,No. Brief facts: Present petition has been filed under Sections 100 to 105 of the Companies Act, 1956 (for short ‘Act’) read with Rule 46 of the Companies (Court) Rules, 1959 (for short ‘Rules, 1959’) for confirming the reduction of share capital of the petitioner-company.
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The scheme of reduction of capital was objected by the only remaining objector on the following grounds:
The present Scheme of Reduction is nothing but a product of wrong economic policies being followed by the Government of India, which amounts to ‘’forcible acquisition’’ of shares of public shareholders as only their shares are being extinguished, whereas the shares of the promoter group remain unaffected. According to him, the actual intent and reason for reduction of share capital is only to ‘’eliminate’’ the minority public shareholders as members of the company and is thus, wholly unfair, discriminatory and mala fide.
The Scheme of Reduction does not fall within any of the three modes of reduction of share capital provided for in Section 100(1) of the Act. The petitioner has acted in a mala fide manner by clubbing the minority shareholders whose rights are being affected by the proposal to reduce the share capital along with petitioner’s own subsidiary namely, Lancaster Square holdings SL. Such artificial classification of the class of shareholders for holding class meetings of shareholders for reduction of share capital by the petitioner is absolutely wrong and irrational and it has been made only with a view to ensure that the special resolution is passed. Had the petitioner company constituted the true minority shareholders i.e. the public shareholders as a separate class of shareholders, then it would have been impossible for the petitioner company to pass the special resolution for “extinguishing” their shares.
The reduction of share capital proposed by the petitioner is in effect a buy-back of the shares by the petitioner under Section 77A of the Act. Consequently, he submits that reduction of share capital has to be done on proportionate basis in accordance with Section 77A(5) of the Act.
Decision: Petition allowed. Reason: In the instant case, the proposed scheme of arrangement, was unanimously approved by 100 per cent, vote, and there was not even a single vote, which was polled
against the proposed scheme of arrangement. This apart, the petitioner had made provision for depositing a sum of Rs.45 lakhs and earmarked a sum of Rs.6.50 crores, for meeting the payment needs of the shares, which may be cancelled. When the shareholders, in their wisdom, thought that the proposed scheme of arrangement, is fair and reasonable for them and that it had safeguarded their interest, it is not for this Court to go into the pros and cons thereof and balance them. Suffice it to say that the proposed scheme of arrangement, having been approved by 100 per cent, vote and there being no resistance from any of the shareholders or persons interested in the affairs of the company, this court has no other alternative except to approve the proposed scheme of arrangement, as approved by the shareholders of the company. In view of the aforesaid, it is apparent that the conditions precedent in Section 77A (5) of the Act are applicable only to buy-back of shares under Section 77A of the Act. Consequently, Section 77A(5) of the Act does not apply to a Scheme of Reduction under Section 100 of the Act, as the two operate in entirely different fields. As far as challenge to economic policy is concerned, it is well settled that Courts do not interfere with an economic policy which is in the domain of the executive unless the same is capricious, arbitrary, illegal or uninformed. Also, it is not the function of a Court to sit in judgment over matters of economic policy which must be necessarily left to expert bodies. In fact, a Court does not supplant the view of an expert with its own. [See Balco Employees Union v. Union of India (2002) 2 SCC 333]. Accordingly, it is not open for this Court to strike down the Government policy of removing sectoral caps in personal care and health sector. Consequently, keeping in view the aforesaid as well as the fact that reduction of share capital is a commercial and business decision, which has been approved by 99.999% of equity shareholders of petitioner-company and only 0.0020% of shareholders are opposing the new purchase price of Rs. 1500/per share, this Court is of the opinion that there is no valid reason for not accepting the proposed scheme of reduction of share capital. It is, accordingly, allowed.
General Laws LW 122.11.2011 SMT. HAR DEVI ASNANI v. STATE OF RAJASTHAN & OTHERS [SC] Civil Appeal No. 8325 of 2011 (Arising out of SLP (C) NO. 20964 of
2010) with Civil Appeal No. 8326 of 2011 (Arising out of SLP (C) NO. 17233 of 2010) R. V. Raveendran & A. K. Patnaik, JJ.[Decided on 27/09/2011] Rajasthan Stamp Act, 1998 – Exorbitant valuation for the
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purposes of stamp duty made by the collector of stamps – Petitioner filed writ petition against such exorbitant valuation – High Court dismissed the writ stating that alternative remedy of revision is available to the petitioner under the Stamp Act – Whether correct – Held, No. Brief facts: The appellant purchased Plot No. A-7 situated in the Housing Scheme No.12, Ajmer Road, Jaipur, of Krishna Grah Nirman Sahakari Samiti Limited by a registered Sale Deed dated 16.05.2007 for a consideration of Rs.18 lacs. The Sale Deed was executed on a stamp duty of Rs.1,17,000/-. The Sub- Registrar determined the value of the land at Rs.2,58,44,260/-. The Additional Collector (Stamps)served a notice to the appellant to show-cause why prosecution against the appellant should not be initiated for concealing or misrepresenting facts relating to the valuation mentioned in the Sale Deed resulting in evasion of stamp duty. The appellant filed a reply stating therein that the plot of land purchased by her under the Sale Deed was allotted to her for residential purposes and was not meant for commercial use and that the sale price was paid entirely by a cheque. The appellant also stated in her reply that adjacent to the plot purchased by her, Plot No.A-3 near Scheme No.12, Roop Sagar, had been sold by a registered Sale Deed on 16.12.2006 and another Plot No.A-38, near Scheme No.12, Roop Sagar, at a price less than the price in the Sale Deed dated 16.05.2007 under which she had purchased Plot No.A-7 in Housing Scheme No.12. Along with the reply, the appellant had also furnished copies of the two Sale Deeds of the adjacent Plot Nos.A-3 and A-38 in Scheme No.12. In the reply, the appellant requested the Additional Collector (Stamps) to drop the recovery proceedings. The Additional Collector (Stamps) upheld determination made by the Sub-Registrar and accordingly made the demand on the appellant and directed recovery of the same. Aggrieved, the appellant filed SB Civil Writ Petition No.12422 of 2009 before the Rajasthan High Court challenging the order of the Additional Collector (Stamps). A learned Single Judge of the High Court dismissed the Writ Petition holding that the appellant had a remedy against the order of the Additional Director by way of a revision before the Board of Revenue and as there was an alternative and efficacious remedy available to the appellant, there was no just reason for the appellant to invoke the extra- ordinary jurisdiction of the High Court under Articles 226 and 227 of the Constitution of India. The appellant then filed D.B. Civil Appeal (Writ) No.1261 of 2009 before the Division Bench of the High Court which upheld the decision of the Single Judge. The appellant appealed to the Supreme Court. Decision: Appeal allowed. Reason: The learned Single Judge of the High Court and the
Division Bench of the High Court have taken a view that as the appellant has a right of revision under Section 65(1) of the Act, the writ petition of the appellant challenging the determination of the value of the land at Rs.2,58,44,260/- and the demand of additional stamp duty and registration charges and penalty totalling to Rs.15,70,000/- could not be entertained under Article 226 of the Constitution. The learned Single Judge of the High Court and the Division Bench of the High Court have not considered whether the determination of market value and the demand of deficit stamp duty were exorbitant so as to make the remedy by way of revision requiring deposit of 50% of the demand before the revision is entertained ineffective. In Government of Andhra Pradesh and Others v. P. Laxmi Devi (supra) this Court, while upholding the proviso to subsection (1) of Section 47-A of the Indian Stamp Act introduced by Andhra Pradesh Amendment Act 8 of 1998, observed: “In our opinion in this situation it is always open to a party to file a writ petition challenging the exorbitant demand made by the registering officer under the proviso to Section 47-A alleging that the determination made is arbitrary and/ or based on extraneous considerations, and in that case it is always open to the High Court, if it is satisfied that the allegation is correct, to set aside such exorbitant demand under the proviso to Section 47-A of the Stamp Act by declaring the demand arbitrary. It is well settled that arbitrariness violates Articles 14 of the Constitution vide Maneka Gandhi v. Union of India [(1978) 1 SCC 248]. Hence, the party is not remediless in this situation.” In our view, therefore, the learned Single Judge should have examined the facts of the present case to find out whether the determination of the value of the property purchased by the appellant and the demand of additional stamp duty made by the appellant by the Additional Collector were exorbitant so as to call for interference under Article 226 of the Constitution. We, therefore, allow the appeal arising out of S.L.P. (C) No.17233 of 2010, set aside the order passed by the learned Single Judge of the High Court in SB Civil Writ Petition No.1244 of 2009 and the order passed by the Division Bench of the High Court in D.B. Civil Appeal (Writ) No.1261 of 2009 and remand the writ petition back to the High Court for fresh consideration in accordance with law. No costs.
LW 123.11.2011 TATA MOTORS LIMITED & ANR v. STATE OF WEST BENGAL & ORS [CAL] W.P. No. 9949 (W) of 2011 with W.P. No. 10198 (W) of 2011 I. P. Mukerji,J.[Decided on 28.09.2011]
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Singur Land Rehabilitation and Development Act, 2011 – Reclaiming the land from Tata Motors Ltd. – Whether the Act is constitutionally valid – Held, Yes. Brief facts: In and around 2006, the Government of West Bengal acquired approximately 997.11 acres of land in and around Singur for the purposes of leasing out the same to Tata Motors Ltd for setting up a factory for the manufacture of the small car “Nano”. A formal deed of lease was executed on 15th March, 2007. The duration of the lease was ninety years from the date of execution. The lessee had the obligation to build an automobile plant and related facilities on the land. No premium was asked for or paid by the Tatas. The annual rent was rupees one crore per year for the first five years with a 25% increase on the expiry of the period with similar increase every five years for a period of thirty years from the date of execution of the lease. Then there was a provision for further increase. The rent payable from the 61st year till the end of the term was rupees twenty crores annually. As provided in the recital part of the lease 645.67 acres of land were let out. Clause 10 of the covenants disentitled the lessee to permit any other person to use any part of the demised land for any purpose apart from the purpose of the lease which was for setting up of an automobile plant. Clause 13 forbade the lessee to sublease or assign any part of the lease. However, any company which was a subsidiary or part of the group of the lessee would be permitted to enjoy it. The termination clause contained in part VI of the lease is very significant. Clause 1 of part VI, inter alia, provided that if the lessee had not utilised the demised land for a period of three years or more, the lessor had the right to give notice indicating the breach and if such breach was not rectified within six months from the date of receipt of the notice, the lessor would have the right to determine the lease. But such notice of determination could not be exercised unless another notice of three months was served on the lessee. By clause 2 the lessee had also the right to determine the lease in case of any breach of covenant by the government upon notice of six months followed by another three months’ notice, similar to the determination by the government. In case of determination the lessee under clause 1d had one year’s time to remove their plant, machinery, equipment and so on.
came to a standstill. Tatas moved out of Singur and set up their project in Gujarat. Upon the change of Government after the general election in 2011, Trinamool Congress came to power and the new legislature enacted the impugned Singur Land Rehabilitation and Development Act, 2011[SLRDA]under which the leasehold rights granted to Tatas were extinguished and the land was proposed to be returned to the original owners from whom it was acquired. In exercise of the power conferred by Section 9 of the SLRDA, the Singur Land Rehabilitation and Development Rules, 2011 were framed. It contains the machinery for allotment and distribution of land to persons who unwillingly delivered up their land during the acquisition process of 2006. Although these rules have been challenged, no substantial arguments were made in this behalf. The attack was confined to the validity of the Act and the manner of its implementation for taking possession of the land in occupation of the Tatas. Decision: Petition dismissed. Reason: After elaborately dealing with the concept of the State’s power to acquire land for companies and its power to reclaim the land with respect to both English and Indian judgements, the court concluded as under:
Trouble started not long after execution of the lease. There was widespread resentment from the local people and this resulted in not putting up the entire construction of the factory as there were intermittent disruptions caused by local elements. This made Tatas to inform the Government of West Bengal that they may opt to go out of Singur if the troubles persist. The issue culminated to a political agitation and the project 1595
The Singur Land Rehabilitation and Development Act, 2011 is held to be constitutional and valid. The Singur Land Rehabilitation and Development Rules, 2011 are also held to be constitutional and valid. So is, any action taken by the state, thereunder.
The above Act was not wholly an exercise of the power of the state legislature under entry 18 of list II of the seventh schedule to the Constitution of India, but, was also an exercise of its power under entry 42 of list III. Hence, there was acquisition of land leased out to the Tatas.
Sufficient public purpose for making such acquisition is made out in the above Act.
There is a provision in Section 5(2) of the above Act for award of compensation by the District Judge, Hooghly on an application made by the Tatas. Although, there is an intention expressed by the legislature, to pay compensation, the intention expressed is vague and uncertain. Therefore, this Court has made an interpretation of this provision in the foregoing part of this judgment. According to the interpretation made by this Court compensation is to be awarded by applying the principles for award of compensation enshrined in Sections 23 and 24 of the Land Acquisition Act, 1894, as applicable, which are deemed to (LW - 138) NOVEMBER 2011
be incorporated into Section 5(2) of the impugned Act, by reading land as provided in those sections with the definition section of that Act and by taking the date of notification provided in the said sections as the date of notification of the impugned Act. Furthermore, the application has to be determined by award of compensation by the District Judge, Hooghly, within six months of making such application by the Tatas. Furthermore, if the Government admits any compensation in its rejoinder to the application to be filed by the Tatas, the Government should pay that compensation immediately, since it has taken possession of the land. The District officials have exceeded their powers in taking possession of the land without any notice to the Tatas and acting so hastily as discussed in the foregoing part of this judgment. Therefore, the District Magistrate and the Superintendent of Police, Hooghly are appointed and constituted as Joint Special Officers by this Court, in addition to their official duties, to ensure safe and smooth transition of this land from the Tatas to the State, by carefully and scrupulously taking all necessary steps so that the Tatas are allowed to remove their items if any that remain on the land, after making an
inventory thereof to be signed by them as well as by a representative of the Tatas within a period of two months from this date, including the period of stay of this order. Both the writ applications are disposed of. I make it clear that this decision is confined to issues decided between the parties.
As the issues involved are most contentious between the parties, I am of the opinion that any aggrieved party should be given a chance to test this judgment and order in appeal. Moreover, very shortly, the Puja vacation of this Court will start and this Court will reopen only on 31st October, 2011. Of course, there will be a Vacation Bench. But, I do note that most of the lawyers utilise this holiday for being on vacation. Therefore, for the ends of justice I order unconditional stay of this judgment and order till 2nd November, 2011.
All parties and the District Magistrate, Hooghly and the Superintendent of Police, Hooghly are to act on an authenticated photo plain copy of the judgment and order, subject to the undertaking to apply for and obtain a certified copy or a certified photo copy of this judgment and order.
Labour & Industrial Laws LW 124.11.2011 M/S L.N. GADODIA & SONS & ANR v. REGIONAL PROVIDENT FUND COMMISSIONER [SC] Special Leave Petition (Civil) No. 11230 of 2008 J.M. Panchal & H.L. Gokhale, JJ.[Decided on: 26/09/ 2011] Employees Provident Funds and Miscellaneous Provisions Act, 1952 – Clubbing of establishments – Two companies controlled by one family – Whether clubbing them together is tenable – Held, yes. Brief facts: The Petitioner No.1 herein and Petitioner No.2 (M/s Delhi Farming and Construction Pvt. Ltd.) are sister concerns. The office of the respondent wrote to them to comply with the provisions of the Provident Funds Act, failing which legal action would be initiated against them. The petitioner filed an application, and disputed clubbing of the two concerns for the purposes of their coverage under the provisions of the said Act. The application was accordingly heard by the Regional Provident Fund Commissioner (Enforcement and Recovery). Having considered all the facts and the submissions by both the parties, the Provident Fund Commissioner came to the
conclusion that there was an integrity in the management, finance and the workforce of the two companies, and the entire business was being run by one family. The management and the supervision was in the hands of the same Managing Director, and the finances of one company were being used by the other. In view of this, he held that both the units belonged to one establishment, and they have to be clubbed together for the purposes of application of the Provident Funds Act. He therefore, passed an order to proceed to determine the dues from the petitioners, and directed that further proceedings in the enquiry be taken up by the concerned Presiding Officer. This order was challenged by the petitioners before the Employees Provident Fund Appellate Tribunal, which allowed the appeal and held that clubbing was not possible in the facts of the case, and set-aside the order of the first respondent. Being aggrieved by that order, the respondent filed a petition in the High Court. The Single Judge set-aside the order of the Tribunal. The petitioners filed an appeal against the decision of the Single Judge before the Division Bench, which also came to the same conclusion as the single Judge and dismissed the appeal. The Petitioners moved the Supreme Court. Decision: Petition is dismissed. Reason: In the present case the Directors of the two petitioner
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companies belong to the same family. The Managing Director is common. The two senior officers i.e. Commercial Manager and Technical Manager are common. At the time of inspection, the Enforcement Officer noticed that the employees of the two companies were being swapped. Both of them have same registered address and common telephone numbers and a common gram number. The audited accounts revealed that the second petitioner company had given a loan of Rs. 5 lakhs to the first petitioner in the year 1988. The two companies are family concerns of the Gadodia family. Hence, in the facts of the present case we have to hold that there is integrity of management, finance and the workforce in the two private limited companies. The two companies have seen to it that on record each of the two entities engage less than twenty employees, although the number of employees engaged by them is more than twenty when taken together. The entire attempt of the petitioners is to show that the two entities are separate units so that the Provident Funds Act does not get attracted. The material on record however, leads to only one pointer that the two entities are parts of the same establishment and in which case they get covered under the Provident Funds Act. It cannot be denied that the two petitioners carry on a trade or business for private gain from the premises wherein the two companies are situated. They would therefore, fall within the definition of ‘commercial establishment’ and consequently, under the definition of ‘establishment’. The only question is whether they are to be treated as two separate establishments or one establishment for the purposes of this Act. The petitioners have contended that the two entities are two separate establishments. They have tried to draw support from section 2(A) of the Act which declares that where an establishment consists of different departments or has branches whether situated in the same place or in different places, all such departments or branches shall be treated as parts of the same establishment. It was submitted that only different departments or branches of an establishment can be clubbed together, but not different establishments altogether. In this connection, what is to be noted is that, this is an enabling provision in a welfare enactment. The two petitioners may not be different departments of one establishment in the strict sense. However, when we notice that they are run by the same family under a common management with common workforce and with financial integrity, they are expected to be treated as branches of one establishment for the purposes of Provident Funds Act. The issue is with respect to the application of a welfare enactment and the approach has to be as indicated by this Court in Sayaji Mills Ltd. (supra). The test has to be the
one as laid down in Associated Cement Company (supra) which has been explained in Management of Pratap Press (supra). The Regional Provident Funds Commissioner was therefore, entirely justified in taking the view that on the facts and law, the two petitioners had to be clubbed together for the purposes of their coverage under the Provident Funds Act. The Appellate Tribunal clearly erred in re-appreciating the facts on record and applying wrong propositions of law thereto. The learned Single Judge was therefore required to set-aside the order of the Appellate Tribunal in view of his conclusion that the order was contrary to the facts and the law, and was perverse. The Division Bench has rightly confirmed the order passed by the learned Single Judge.
LW 125.11.2011 BUDDHADEV MAITY &ANR v. UNION OF INDIA & ORS. [DEL] W.P. (C) 6856/2011 S. Muralidhar, J. [Decided on 21/09/2011] Contract Labour Regulation and Abolition (Central) Rules, 1971 – Rule 25(2)(v)(a); Constitution of India – Article 226 (2)-contract labours working in West Bengal – Chief Labour commissioner (Central), located in Delhi, did not take any action on their representation – Writ petition filed in Delhi High Court – Whether maintainable – Held,No. Brief facts: The Petitioners are residents of Midnapore in West Bengal and are employed as contract labours withIndian Oil Corporation (IOC) at its Haldia Oil Refinery Plant in West Bengal. They made representation to Chief Labour Commissioner (Central) (CLC ) to take a decision on the Petitioners representation regarding payment of wages to contract labour, like the Petitioners, on par with the regularly employed workmen performing the same work in the Respondent Indian Oil Corporation (IOC ) at its Haldia Oil Refinery Plant in West Bengal. Since no action was taken by the CLC, the petitioners filed a writ petition in the Delhi High Court praying for issuing a direction to CLC to take decision on their representation. Issue: Whether Delhi High Court has jurisdiction to entertain the petition? Decision: Petition dismissed. Reason: Referring to Rule 25 (2) (v) (a) of the Contract Labour Regulation and Abolition (Central) Rules, 1971, It has been pointed out that the decision in this regard has to be taken only by the CLC who is located in Delhi. It is submitted that the failure of the CLC to reply even to the legal notice issued on behalf of the Petitioners to him provides a cause of
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action for this Court to entertain the writ petition. It is further submitted that in terms of the judgment of Five Judge Bench of this Court in Sterling Agro Industries Limited v. Union of India, this Court has to only examine whether it is convenient for all the parties for it to entertain the writ petition. It is submitted that in as much as the Petitioners, who are admittedly residing in Midnapore in West Bengal, have subjected themselves to inconvenience by approaching this Court for relief, and are not going to complain of such inconvenience, and further since the Respondents are also not going to suffer inconvenience in defending the writ petition, the present writ petition ought to be entertained. The question whether the High Court should entertain a writ petition only because the authority against whom the relief is sought is located within its territorial jurisdiction has come up for decision on a number of occasions before the Supreme Court. Illustratively reference may be made to the decision in Kusum Ingots & Alloys Ltd. v. Union of India (2004) 6 SCC 254. Admittedly, no decision has yet been taken by the CLC on the application filed by the Petitioners. It is, therefore, not even clear whether any cause of action has yet arisen within the jurisdiction of this Court. Be that as it may, the mere fact that the CLC is located in Delhi does not necessitate this Court having to entertain the writ petition. The Petitioners are in West Bengal
and their place of work is also in West Bengal. The question concerns payment of wages to them at their place of work. The procedure involved in the decision to be taken by the CLC requires verification of facts by a Deputy Labour Commissioner functioning in West Bengal. He is expected to make a field visit to ascertain the facts. All these factors are relevant in ascertaining the cause of action for the present petition. Lastly, it is not as if the High Court of Kolkata, if approached with a writ petition, cannot issue directions to the CLC. Article 226 (2) of the Constitution is intended for such contingency. As regards convenience of parties, the question is not merely of one of the parties not complaining about its inconvenience in appearing before this Court. The question is one of principle. If more than one Court were to entertain writ petitions on the same set of facts it would, apart from a possibility of inviting conflicting orders, also encourage forum shopping. From the point of view of litigants, there has to be certainty on which High Court can entertain a writ petition, given the facts and circumstances of a case. The decision of the Five Judge Bench of this Court in Sterling Agro Industries Limited was intended to bring about that certainty. This Court is accordingly not inclined to entertain this writ petition. It would of course be open to the Petitioners to approach the appropriate forum for relief. Nothing stated in this order is to be construed to be an expression of opinion on merits.
Consumer Protection Laws LW 126.11.2011 TRANS MEDITERRANEAN AIRWAYS v. M/S UNIVERSAL EXPORTS & ANR[SC] Civil Appeal No. 1909 of 2004 G.S. Singhvi & H.L. Dattu, JJ.[Decided on 15/09/2011] Consumer Protection Act, 1986 – Non delivery of consignment by foreign airliner – Complaint entertained by National Commission and compensation granted – Whether foreign airliner amenable to the jurisdiction of national Commission – Held,Yes. Brief facts: The appellant before us is an International Cargo carrier, with its principal place of business at Beirut, Lebanon. Respondent No.1 is a garment exporter and respondent No.2 is an accredited International Air Transport Association agent. The agent made out three airway bills for shipping of garments to Spain on behalf of the consignor through the appellant-carrier. In the consignee column, the consignment was addressed as: The airway bills from Bombay to Amsterdam were dated 2508-1992 and the consignment through the appellant-carrier reached Amsterdam on 30-08-1992. From Amsterdam, the
consignments were sent to Madrid by road on the following day, and they reached Madrid on 03-09-1992 and were cleared by the Customs Authorities. The appellant-carrier delivered the consignment to M/s Liwe Espanola, as according to them, that was the only recognizable address available from the documents furnished by the consignor. After nine months from the date of shipment, the agent made enquiry regarding two of the three airway bills. Since there was no response, the agent made further enquiry again after four months. In response to the query, the appellant-carrier informed the consigner that on finding the full name and complete postal address of the consignee as M/s Liwe Espanola, the appellantcarrier has delivered the goods to it. It was at this stage, the consignor claimed that the consignee of the said consignment was Barclays Bank, Madrid, which had only one branch in Madrid and since the appellant carrier had wrongly delivered the consignment to the address mentioned in the Block column instead of routing it through Barclays Bank and, therefore, there is deficiency of service. Accordingly, the consignor instituted a complaint under Section 12 of the CP Act before the National Commission, inter alia, claiming compensation for the alleged deficiency of service by the appellant-carrier and the agent for
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not delivering the said consignment to the consignee. The National Commission, after considering the entire evidence on record, has come to the conclusion that the services rendered by the appellant-carrier was deficient and thereby, it was liable to pay compensation equivalent to US $71,615.75 with 5% interest from the date of the Complaint till its realization, and imposed costs of Rs.1 lakh. It is the correctness or otherwise of this order, which is called in question in this appeal. Decision: Appeal is dismissed. Reason: In our view, the protection provided under the CP Act to consumers is in addition to the remedies available under any other Statute. It does not extinguish the remedies under another Statute but provides an additional or alternative remedy. In the instant case, at the relevant point of time, the value of the subject matter was more than Rs.20 lakhs, by which the National Commission is conferred jurisdiction for any cause of action that arises under the Act. In the present case, as we have already noticed that the consignor had furnished all the relevant information in the airway bill which would satisfy the requirements of both Rule
6 and 16 of the rules and, therefore, the consignor cannot be accused of not furnishing the correct particulars and information in the airway bill which is handed over to the appellant-carrier with the cargo. In our view, the appellantcarrier cannot absolve its responsibilities by contending that it would be practically impossible to verify the correctness of all the airway bills which are furnished with the cargo. The appellant’s contention that the name and address of the consignee was inadequate is difficult to accept. There is evidence on record to show that documents supporting the letter of credit were sent by the consignors using the selfsame name and address and there was no difficulty in the same being delivered to the consignee bank. We are in total agreement with the conclusion reached by the National Commission. Therefore, we do not see any merit in the contention canvassed by the learned counsel for the appellant-carrier. We conclude that the National Commission has jurisdiction to decide the dispute between the parties and it is a Court and that there was deficiency in service by the appellant-carrier.
Tax Laws property for use in the course of or furtherance of business or commerce by itself is service.
LW 127.11.2011 HOME SOLUTIONS RETAILS (INDIA) LTD. v. UNION OF INDIA & ORS. [DEL] WP (C) Nos. 3746 of 2011 along with connected petitions. Dipak Misra, CJ and A.K. Sikri, J. [Decided on 23/09/2011] Finance Act, 1995 – Section 65(105)(zzzz) – Service tax on renting of immovable property – Whether constitutionally valid – Held, Yes – Whether the retrospective effect given in the amendment is valid – Held, yes. Brief facts: In this batch of writ petitions preferred under Article 226 of the Constitution of India, the constitutional validity of levying service tax on renting of immovable property under section 65(105) (zzzz) of the Finance Act, 1995 (for short the 1995 Act) and Section 66 as amended by the Finance Act, 2010 (for brevity the 2010 Act) is called in question. The matters were initially placed before a Division Bench wherein the learned counsel for the parties raised many a submission and regard being had to the nature of the cases, the Division Bench thought it appropriate that the controversy should be dwelled upon by a larger Bench. Thereafter, the matters have been placed before us. Decision: Petitions dismissed. Reason: In the first Home Solution case, the Division Bench had posed the question whether the renting of immovable
The Bench referred to Section 65(105)(zzzz) as it stood then and opined that it was unable to discern any value addition and, hence, the renting of immovable property for use in the course or furtherance of business or commerce by itself does not entail any value addition and, therefore, cannot be regarded as service. Because of the said view, the circular was quashed. Be it noted, in the said decision, the Bench has not appositely adverted to Section 65(90a) which clearly postulated that renting of immovable property includes renting, letting, leasing, licensing or other similar arrangements for use in the course or furtherance of business or commerce barring certain exceptions. In Section 66(105)(zzzz), the taxable service was defined to mean any service provided to any person by any other person relating to the renting of immovable property for use in the course of or furtherance of business or commerce. The Parliament, by amendment, has differently positioned the words “in relation to”. As we perceive, the Division Bench has laid down that the mere renting of immovable property for use in the course of or furtherance of business or commerce by itself could not entail any value addition. If the definition in Section 65(90a) is taken into consideration, there is a deeming concept with regard to service and the taxable service is based or founded on renting of immovable property. The learned senior counsel for the petitioner would contend that the Parliament cannot, by deeming fiction, create a tax
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liability to bring it within the purview of Entry 97 of List I as that would be an indirect entrenchment on Entry 49 of List II. Per-contra, Mr. Chandhiok, relying on the decision in Tamil Nadu Kalyana Mandapam Assn. (supra), submits that the concept of service, as is understood by a layman, is not applicable to the concept of taxing statute under the constitutional framework. He would further contend that once this Court holds that the levy does not pertain to a tax on land or building but an activity like renting, leasing, licensing or other similar arrangements of immovable property for use in the course or furtherance of business or commerce, it would come within the residuary power of the Parliament and the same should put the controversy to rest. As presently advised, we shall dwell upon the concept of value addition. The hub of the matter is when a premise is let out for use, should a person who rents an immovable property or renders any other service in relation to such letting for use in the course or furtherance of business or commerce be liable to service tax. The Division Bench in the first Home Solution case (supra), as we have reproduced hereinbefore, has opined that renting of immovable property for use in the course or furtherance of business or commerce by itself would not constitute service as there is no value addition. In the dictionary clause in Section 65(90A), while defining renting of immovable property, it has been stated that it includes renting, letting, leasing, licencing or other similar arrangements for immovable property for use in the course or furtherance of business or commerce. On a perusal of the decision in the first Home Solution case (supra), it is discernible that the Division Bench has not appositely adverted to the same. The contention that despite the amendment when the value addition as a concept is not attracted to renting, letting, leasing and licencing even for commercial purpose, the ingredients of service tax are not satisfied is not well founded. In this context, it is to be appreciated that the concept of service, as is understood in common parlance or common understanding, would not be a factor to hold a provision as unconstitutional. We need not advert to whether the Parliament has, by using of the definition, created a fiction. The terms which are significant are renting, letting, leasing and licencing for use in the course or furtherance of business or commerce. The legislature has not merely said renting of immovable property. It has used the terminology renting of property or any service in relation to such renting and that too in the course or furtherance of business or commerce, the last part being important. While understanding the concept of service tax, it is to be kept in mind that it is both a general tax as well as a destination based consumption tax levied on services. Sometimes services can be “property based services” and “performance based services”. The architects, interior designers and real estate agents would come in the category of performance service providers. It is contended that when a property is leased or rented, the
element of service is absolutely absent. In this context, the concept of rent has to be appositely understood. A rent is basically a reward paid for the use of the land. The tenant or the occupant pays the same to use the premises. In the economic concept, rent can be categorized into two heads, namely, contract rent and economic rent. Contract rent fundamentally refers to the total amount of money paid for use of the land and economic rent is a part of the total payment which is made for the use of land and it is estimated on many a ground. The economic rent can be contract rent minus interest on the capital invested. To give an example, a tenant pays Rs.20,000/- per year as contract rent but the interest on capital invested is Rs.3,000/- per year. Thus, the remaining amount, that is, Rs.17,000/- (Rs.20,000.00 – Rs.3,000.00) is paid for the use of the land. The concept of economic rent can also represent an amount which a factor can earn in its next best alternative use. To give an example, a piece of land yields in a particular use Rs.5,000 in a year. If it is transferred to its next best use, it can earn a better income. At one point of time, the Theory of Rent was propagated by David Ricardo. According to the Ricardian theory, rent has differential surplus and the same arises due to certain facets relating to fertility, productivity, extensive cultivation, quality, etc. Ricardo fundamentally considered rent as a surplus accruing to superior land over inferior land called “marginal land”. It also depended upon shifting of population. Be it noted, the rent varies depending upon advantages. To give an example, two decades back, a market is established in zone A, thereafter, a railway station starts in another zone called B. The cost of a particular item on being transported from zone A to outside the city will cost more than the articles transported from zone B. Compared to zones A and B , if there are other zones which are farther away like zones C and D , they will be less advantageous. Thus, the lands or buildings located in zones A and B would be more advantageous. The value difference comes into play because of transport charges. The surplus arises because of the location and availability of facilities. Appreciated in this context, economic rent is a surplus which arises on account of natural differential advantages and can be treated as service. That apart, scarcity of premises, the pressure of demand and the increase of population are also contributory factors. Consequently, any land or building situated in a particular place does possess certain inherent qualities which distinguish it from land or building at other places. The factors which really weigh are location, accessibility, goodwill, construction quality and other advantages. A land or building in one area may fetch more rent than in another area. When a particular building is rented or leased or given under arrangement for commercial or business purposes, many factors are taken into consideration. Every building or premises cannot be utilized for commercial or business purposes. When a particular building or premises has the “effect potentiality” to be let out on rent for the said purpose,
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an element of service is involved in the immovable property and that tantamount to value addition which would come within the component of service tax. To further clarify, an element of service arises because a person who intends to avail the property on rent wishes to use it for a specific purpose. The value of the building gets accentuated because of scarcity of land or building, goodwill, accessibility and similar ancillary advantages which constitute value addition. The modern economic theory of rent also has a nexus with demand and supply. In this analysis, rental is hiked because supply of land is scarce in relation to its demand. This economic concept is called “scarcity theory of rent”. This includes the facet of competition and quality. According to the modern theory, rent is not peculiar to land alone but arises in the case of many a factor which earn over and above the transfer earnings. There is a distinction between “actual earnings” and “transfer earnings”. According to the modern analysis of rent, it is not peculiar to land alone and the concept of transfer earning is more attracted towards the building depending upon its use. As an economic concept, it has been developed that rent qua building or premises or, for that matter, land has a nexus, an inseparable one, with the potentiality of its use in a competitive market. The economic growth has an effect on rent. In this regard, modern economists have evolved certain methods, namely, technical progress in methods of production, development in means of transportation and population growth. We have referred to these concepts only to highlight that the legislature has not imposed tax on mere letting but associated it with business or commercial use. Thus, it comes within the concept of activity and the value addition is inherent. It is worth noting that the language employed in the dictionary clause and the charging section, that is, “commercial use for business purposes” have their own significance. In Black’s law dictionary, “commercial” has been defined as “relates to or is connected with trade and traffic or commerce in general; is occupied with business and commerce”. In R.M. Investment and Trading Co. Pvt. Ltd. v. Boeing Co. and another, (1994) 4 SCC 541, while dealing with the expression “commercial” it has been opined that the expression “commercial” should be construed broadly having regard to the manifold activities which are integral part of international trade today. When premises is taken for commercial purpose, it is basically to subserve the cause of facilitating commerce, business and promoting the same. Therefore, there can be no trace of doubt that an element of value addition is involved and once there is a value addition, there is an element of service. In view of our aforesaid analysis, we are disposed to think that the imposition of service tax under Section 65(105) (zzzz) read with Section 66 is not a tax on land and building which is under Entry 49 of List II. What is being taxed is an activity,
and the activity denotes the letting or leasing with a purpose, and the purpose is fundamentally for commercial or business purpose and its furtherance. The concept has to be read in conjunction. As we have explained that service tax is associated with value addition as evolved by the judgments of the Apex Court, the submission that the base of the said decisions cannot be taken away by a statutory amendment need not be adverted to. Once there is a value addition and the element of service is involved, in conceptual essentiality, service tax gets attracted and the impost gets out of the purview of Entry 49 of List II of the Seventh Schedule of the Constitution and falls under the residuary entry, that is, Entry 97 of List I. In view of our conclusion, the decision in the first Home Solution case does not lay down the law correctly inasmuch as in the said decision, it has been categorically laid down that even if a building/land is let out for commercial or business purposes, there is no value addition. Being of this view, we overrule the said decision. The next limb of attack is with regard to the retrospective applicability of the provision. It is worth noting that the Parliament, keeping in view the first Home Solution case, substituted sub-clause (zzzz) in the present incarnation and gave retrospective effect to cure the deficiency. It is well settled in law that it is open to the legislature to pass a legislation retrospectively and remove the base on which a judgment is delivered. In State of Himachal Pradesh v. Narain Singh, (2009) 13 SCC 165, it has been held that it would be permissible for the legislature to remove a defect in earlier legislation and the defect can be removed both retrospectively and prospectively by legislative action and the previous actions can be validated. On the question of penalty due to non-payment of tax, it is open to the government to examine whether any waiver or exemption can be granted. It may be noted that the appeal against Home Solutions-I is pending before the Supreme Court but the operation of the said judgment has not been stayed. Quite apart from the above, as we have overruled the first Home Solution case, we are disposed to think that the provisions would operate from 2007 and the amendment brought by the Parliament is by way of ex abundanti cautela. In view of the aforesaid analysis, we proceed to enumerate our conclusions in seriatim as follows:
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The provisions, namely, Section 65(105)(zzzz) and Section 66 of the Finance Act, 1994 and as amended by the Finance Act, 2010, are intra vires the Constitution of India.
The decision rendered in the first Home Solution case does not lay down the correct law as we have held that there is value addition when the premises is let out for use in the course of or furtherance of business or commerce and it is, accordingly overruled.
(LW - 144) NOVEMBER 2011
The challenge to the amendment giving it retrospective effect is unsustainable and, accordingly, the same stands repelled and the retrospective amendment is declared as constitutionally valid.
persons who were in charge of and responsible for the conduct of business of the company at the time of commission of an offence, who will be liable for criminal action. It follows from this that if a director of a company who was not in charge of and was not responsible for the conduct of the business of the company at the relevant time, will not be liable under the provision. The liability arises from being in charge of and responsible for the conduct of business of the company at the relevant time when the offence was committed and not on the basis of merely holding a designation or office in a company. Conversely, a person not holding any office or designation in a company may be liable if he satisfies the main requirement of being in charge of and responsible for the conduct of business of a company at the relevant time. Liability depends on the role one plays in the affairs of a company and not on designation or status. If being a director or manager or secretary was enough to cast criminal liability, the section would have said so. Instead of “every person” the section would have said “every director, manager or secretary in a company is liable”..., etc. The legislature is aware that it is a case of criminal liability which means serious consequences so far as the person sought to be made liable is concerned. Therefore, only persons who can be said to be connected with the commission of a crime at the relevant time have been subjected to action.”
Consequently, the writ petitions, being sans substratum, stand dismissed without any order as to costs.
LW 128.11.2011 T.R. BHAGAT v. DIRECTOR GENERAL OF CENTRAL EXCISE & ORS. [DEL] CRL.M.C. NO.4104/2009 Ajit Bharihoke, J.[Decided on 23/09/ 2011] Sections 9 of the Central Excise Act, 1944 read with section 482 of the Code of Criminal Procedure, 1973 – Offences by company – Vicarious liability of director – Allegation of clandestine removal of goods – No specific allegation against the accused director – Magistratre took congnizance of the offence – Whether the proceedings deserve quashing – Held, Yes. Brief facts: Respondent No.1 filed a complaint alleging that the petitioner has indulged in evading central excise duty amounting to Rs.4,20,234,52 by clandestinely removing/ selling the office machines. As per the allegations in the complaint, petitioner was Director of M/s Office Machines Pvt. Ltd. As such, he is sought to be prosecuted vicariously for the offences punishable for the offences committed by the company.Learned Magistrate took cognizance of the complaint and charged the aforesaid company as well as the Petitioner for the offences. Aggrieved, the Petitioner moved the Delhi High court to quash the proceedings against him.
In the matter of N.K. Wahi v. Shekhar Singh, AIR 2007 SC 1454, Hon’ble Supreme Court while dealing with the vicarious liability under Section 141 of N.I. Act observed thus: “To launch a prosecution, therefore, against the alleged Directors there must be a specific allegation in the complaint as to the part played by them in the transaction. There should be clear and unambiguous allegation as to how the Directors are incharge and responsible for the conduct of the business of the company. The description should be clear. It is true that precise words from the provisions of the Act need not be reproduced and the court can always come to a conclusion in facts of each case. But still, in the absence of any averment or specific evidence the net result would be that complaint would not be entertainable.”
Decision: Petition allowed. Reason: The wording of Section 9AA(1) of the Central Excise Act is exactly similar to Section 141 of the Negotiable Instruments Act, which deals with the vicarious liability of a Director or other person associated with the company for the offence under Section 138 of N.I. Act committed by the company. The question of interpretation of Section 141 of N.I. Act came up for consideration before a three-Judge Bench of the Supreme Court in SMS Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8 SCC 89 wherein upon consideration of a number of decisions of the Apex Court, Supreme Court opined thus: “What is required is that the persons who are sought to be made criminally liable under Section 141 should be, at the time the offence was committed, in charge of and responsible to the company for the conduct of the business of the company. Every person connected with the company shall not fall within the ambit of the provision. It is only those
Legal position which emerges from the aforesaid is that in order to rope in a Director of a company as accused of an offence under Section 138 of N.I. Act vicariously with the aid of Section 141 of N.I. Act, the complainant is not only required to make a specific allegation that the person concerned was the Director of the company but he is also required to make specific allegation of fact indicating as to how and in what manner the said Director was in-charge of and responsible for the conduct of business of the company. Since the language of Section 9AA(1) of Central Excise Act is exactly similar to Section 141 of N.I. Act, the same principle of law would
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apply to the Director of the company in order to hold him vicariously responsible for an offence committed by the company under Section 9 of the Central Excise Act. Bare reading of allegations made in the complaint makes it clear that the complainant, in order to rope in the petitioner as an accused, has simply re-produced the language of Section 9 AA(1) of the Central Excise Act in the complaint. There is no allegation in the complaint to show as to how and in what manner the petitioner was in-charge of and responsible for day-to-day affairs of the business of the company. Even in the pre-charge evidence, the complainant has not led any evidence to explain as to what is the basis of the averment that the petitioner was responsible for the running of day-to-day business affairs of the company in his capacity as a Director. In absence of any
specific allegation or evidence in this regard, I am of the considered view that requirement of Section 9AA (1) of the Central Excise Act to hold the petitioner vicariously liable for the offence committed by the company is not satisfied. Thus, I find it difficult to sustain the charge framed against the petitioner. In view of the discussion above, I am of the opinion that the allegations in the complaint as also the pre-charge evidence do not make out a case to hold the petitioner responsible for the offence of duty evasion committed by the petitioner company M/s Office Machines Pvt. Ltd. As such, the charge framed against the petitioner under Sections 9(1) (a), 9(1) (b) and 9(1) (bb) of the Central Excise Act is not sustainable under law. Accordingly, the charge framed against the petitioner as also the complaint qua him is quashed.
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PRIZE WINNERS UNDER THE PRIZE AWARD SCHEME FOR ARTICLES PUBLISHED IN VOL. XL (2010) OF "CHARTERED SECRETARY" PANEL OF JUDGES LEGAL DISCIPLINE JUSTICE DR. S MURALIDHAR, FCS Hon'ble Judge, Delhi High Court New Delhi 110 003 SHRI U P MATHUR, FCS Advocate (Former Director, MCA) New Delhi
MANAGEMENT DISCIPLINE
PROF. GURDIP SINGH, Dean Faculty of Law Delhi University, Delhi
FINANCE, ACCOUNTS & TAXATION DISCIPLINE
DR. V K BHALLA Professor of Finance Faculty of Management Studies Delhi University, Delhi
DR. V RAGHUNATHAN CEO, GMR Varalakshmi Foundation, Hyderabad & Former Professor, IIM Ahmedabad
WINNERS AUTHOR
ARTICLE
AWARD
I. Legal Discipline Shri V. Sriraj Dy. Director (Law) CCI, New Delhi
Horizontal Combination (M&A) Analysis - A Comparative Competition Law Perspective
First Prize of Rs. 5,000/-
Dr. K.R. Chandratre, FCS (Past President, The ICSI) Pune
Protection of Minority Shareholder against Majority Power in a Private Limited Company: Conflict between Legal Rights and Equitable Considerations
Second Prize of Rs. 3,000/-
II. Management Discipline Dr. Arindam Ghosh Reader and Head Deptt. of Commerce Panihati College, Sodepur, Dist 24 Parganas (North) & Shri Asit Gope Department of Commerce University of Kalyani Nadia -741235 (West Bengal)
Corporate Governance and Business Ethics: Challenges for Corporate Sectors
First Prize of Rs. 5,000/(Jointly)
III. Finance, Accounts & Taxation Discipline Shri T. N. Pandey Advocate, NOIDA & Former Chairman, CBDT
The Goods and Services Tax-The roadmap as conceived by the 13th Finance Commission
1604
First Prize of Rs. 5,000
NOVEMBER 2011
Corporate Laws
1
Companies (Filing of Documents and Forms in Extensible Business Reporting Language) Rules, 2011 [Issued by the Ministry of Corporate Affairs, vide F.No. 5/ 18/2005-CL-V, dated 05.10.2011] In exercise of the powers conferred by sub-section (1) of section 642 read with section 610B of the Companies Act, 1956 (1 of 1956), the Central Government hereby makes the following rules, namely :
sheet, profit and loss account and other documents as required under section 220 of the Companies Act, 1956 with the Registrar using the extensible business reporting language (‘XBRL’) taxonomy given in Annexure enclosed to the rules for the financial year ending on or after 31st March, 2011 with e-Forms No. 23AC-XBRL and 23ACA-XBRL specified under the Companies (Central Governmen’t) General Rules and Forms, 1956, namely : (i) all companies listed with any stock exchange(s) in India and their Indian subsidiaries ; or
1. Short title and commencement.
(ii) all companies having paid-up capital of rupees five crore or above ; or
(1) These rules may be called the Companies (Filing of Documents and Forms in Extensible Business Reporting Language) Rules, 2011. (2) They shall come into force with effect from the 6th October, 2011. 2. Definitions. In these rules, unless the context otherwise require, –
(iii) all companies having turnover of rupees hundred crore or above. Provided that the companies in banking, insurance, power sectors and non-banking financial companies are exempted for extensible business reporting language (XBRL) filing for the financial year 2010-11. Avinash K. Srivastava
(a) “Act” means the Companies Act, 1956.
Joint Secretary
(b) “Annexure” means the Annexure enclosed to the rules. ANNEXURE*
(c) “Extensible Business Reporting Language” (‘XBRL’), means a standardised language for communication in electronic form to express, report or file financial information by the companies under the Act. (d) “Document and forms” means the documents and forms required to be filed with any authority as specified under the Act or rules or regulations made therein. (e) “Taxonomy” means in extensible Business Reporting Language (XBRL) an electronic dictionary for reporting the business data as approved by the Central Government in respect of any documents or forms indicated in this rule. 3. Filing of balance sheet and profit and loss account with Registrar. The following class of companies have to file their balance
Extensible Business Reporting Language (XBRL) Taxonomy for balance sheets and profit and loss accounts as required under section 220 of the Companies Act, 1956 from the year 2010-11
2
Companies (Central Government’s) General Rules and Forms (Amendment) Rules, 2011
[Issued by the Ministry of Corporate Affairs, vide F No 5/18/ 2005-CL.V, dated 05.10.2011] In exercise of the powers conferred by sub-section (1) of section 642 read with section 610B of the Companies Act, 1956 (1 of * Not reproduced here ; Please log on to : http://www.mca.gov.in/Ministry/ notification/pdf/notification_XBRL_rules.pdf
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1956), the Central Government hereby makes the following rules further to amend the Companies (Central Government’s) General Rules and Forms, 1956, namely : 1. (1) These rules may be called the Companies (Central Government’s) General Rules and Forms (Amendment) Rules, 2011. (2) They shall come into force with effect from 6th October, 2011. 2. In the Companies (Central Government’s) General Rules and Forms, 1956, after Form 23ACA, the following Forms shall be inserted, namely : “ FORM NO. 23AC-XBRL [Pursuant to section 220 of the Companies Act, 1956 and Companies (Filing of documents and forms in eXtensible Business Reporting Language) Rules, 2011]
Form for filing XBRL document in respect of balance sheet and other documents with the Registrar
Note - All fields marked in * are to be mandatorily filled. Authorised capital of the company as on the date of filing
(in Rs.)
Number of members of the company as on the date of filing 1. (a) *Corporate identity number (CIN) of company
Pre-fill
(b) Global location number (GLN) of company 2. (a) Name of the company (b) Address of the registered office of the company
(c) *e-mail ID of the company 3. *Date of balance sheet as at
(DD/MM/YYYY)
4. *Whether the attached balance sheet has been audited by the auditor
O Yes O No
5. (a) *Whether annual general meeting (AGM) held
O Yes O No
(b) If yes, date of AGM
(DD/MM/YYYY)
(c) *Due date of AGM
(DD/MM/YYYY)
(d) Date of AGM in which accounts are adopted by shareholders
(DD/MM/YYYY)
(e) *Whether any extension for financial year or AGM granted
O Yes O No (DD/MM/YYYY)
(f) If yes, due date of AGM after grant of extension 6. *Whether schedule VI of the Companies Act, 1956 is applicable
O Yes O No
7. * Type of Industry 8. *Whether consolidated balance sheet is also being filed
O Yes O No
9. (a) In case of a government company, whether Comptroller and Auditor General of India (‘CAG of India’) has commented upon or supplemented the audit report under section 619(4) of the Companies Act, 1956 O Yes O No (b) Provide details of comment(s) or supplement(s) received from CAG of India
1606
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(c) Director’s reply(s) on comments received from CAG of India
(d) Whether CAG of India has conducted supplementary or test audit under section 619(3)(b) O Yes O No Attachments 1. *XBRL document in respect of balance sheet, schedules, notes thereto, director’s report and auditor’s report
Attach
2. XBRL document in respect of consolidated balance sheet, schedules, notes thereto, director’s report and auditor’s report
Attach
List of attachments
3. Statement of subsidiaries as per section 212 (to be attached Attach in respect of foreign subsidaries) 4. Statement of the fact and reasons for not adopting balance sheet in the annual general meeting (AGM)
Attach
5. Statement of the fact and reasons for not holding the AGM Attach 6. Approval letter for extension of financial year or AGM
Attach
7. Supplementary or test audit report under section 619(3)(b)
Attach
8. Corporate governance report, management discussion and analysis and any other document
Attach
9. Optional attachment(s) – if any
Attach
Remove attachment
Verification *
To the best of my knowledge and belief, the information given in the form and its attachments is correct and complete.
*
I have been authorised by the Board of directors’ resolution number * YYYY) to sign and submit this form.
*
It is confirmed that the attached XBRL document(s) are the XBRL converted copy(s) of the duly signed balance sheet and all other documents which are required to be annexed or attached to the balance sheet as required under section 220 of the Companies Act, 1956. It is further confirmed that such document(s) have been prepared using the XBRL taxonomy as notified under Companies (Filing of Documents and Forms in Extensible Business Reporting Language) Rules, 2011.
dated *
(DD/MM/
To be digitally signed by Managing director or director or manager or secretary of the company *Designation *DIN of the director or managing director ; or Income-tax PAN of the manager ; or membership number, if applicable or income-tax PAN of the secretary (secretary of a company who is not a member of ICSI, may quote his/her income-tax PAN) Certificate *
It is hereby certified that I have verified the above particulars (including attachment(s)) from the audited financial statements of and that all required attachment(s) have been completely attached to this form. It is further certified that the attached XBRL document(s) fairly present, in all material respects, the audited financial statements of the company, in accordance with the XBRL taxonomy as notified under Companies (Filing of Documents and Forms in Extensible Business Reporting Language) Rules, 2011.
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*
It is confirmed that the attached XBRL document(s) are the XBRL converted copy(ies) of the duly signed balance sheet and all other documents which are required to be annexed or attached to the balance sheet as required under section 220 of the Companies Act, 1956.
O Chartered accountant (in whole-time practice)or
O Cost accountant (in whole-time practice) or
O Company secretary (in whole-time practice) *Whether associate or fellow O Associate O Fellow *Membership number or certificate of practice number Modify
Check Form
Prescrutiny
Submit
This eForm has been taken on file maintained by the Registrar of Companies through electronic mode and on the basis of statement of correctness given by the filing company FORM NO. 23ACA-XBRL [Pursuant to section 220 of the Companies Act, 1956, Companies (Filing of documents and forms in eXtensible Business Reporting Language) Rules, 2011]
Form for filing XBRL document in respect of profit and loss account and other documents with the Registrar
Note - All fields marked in * are to be mandatorily filled. Authorised capital of the company as on the date of filing
(in Rs.)
Number of members of the company as on the date of filing 1. (a) *Corporate identity number (CIN) of company
Pre-fill
(b) Global location number (GLN) of company 2. (a) Name of the company (b) Address of the registered office of the company
3. *Period of profit and loss account
From
(DD/MM/YYYY)
To
(DD/MM/YYYY)
4. *Whether consolidated profit and loss account is being filed
O Yes O No
5. *Whether Schedule VI of the Companies Act, 1956 is applicable
O Yes O No
6. *Type of Industry 7. *Whether the attached annual accounts have been audited by the auditors
O Yes O No
Attachments 1. *XBRL document in respect of profit and loss account, schedules and notes thereto
Attach
2. XBRL document in respect of consolidated profit and loss account, schedules and notes thereto
Attach
List of attachments
3. Statement of subsidiaries as per section 212 (to be attached Attach in respect of foreign subsidiaries) 4. Optional attachment(s) - if any
Attach Remove attachment 1608
(GN - 340) NOVEMBER 2011
Verification *
To the best of my knowledge and belief, the information given in the form and its attachments is correct and complete.
*
I have been authorised by the Board of directors’ resolution number * YYYY) to sign and submit this form.
*
It is confirmed that the attached XBRL document(s) are the XBRL converted copy(s) of the duly signed profit and loss account and all other documents which are required to be annexed or attached to the profit and loss account as required under section 220 of the Companies Act, 1956. It is further confirmed that such document(s) have been prepared using the XBRL taxonomy as notified under Companies (Filing of Documents and Forms in Extensible Business Reporting Language) Rules, 2011.
dated*
(DD/MM/
To be digitally signed by Managing director or director or manager or secretary of the company *Designation *DIN of the director or managing director ; or Income-tax PAN of the manager ; or membership number, if applicable or income-tax PAN of the secretary (secretary of a company who is not a member of ICSI, may quote his/her income-tax PAN) Certificate *
It is hereby certified that I have verified the above particulars (including attachment(s)) from the audited financial statements of and that all required attachment(s) have been completely attached to this form. It is further certified that the attached XBRL document(s) fairly present, in all material respects, the audited financial statements of the company, in accordance with the XBRL taxonomy as notified under Companies (Filing of Documents and Forms in Extensible Business Reporting Language) Rules, 2011.
*
It is confirmed that the attached XBRL document(s) are the XBRL converted copy(s) of the duly signed profit and loss account and all other documents which are required to be annexed or attached to the profit and loss account as required under section 220 of the Companies Act, 1956. O Chartered accountant (in whole-time practice)or
O Cost accountant (in whole-time practice) or
O Company secretary (in whole-time practice) *Whether associate or fellow O Associate O Fellow *Membership number or certificate of practice number Modify
Check Form
Prescrutiny
Submit
This eForm has been taken on file maintained by the registrar of companies through electronic mode and on the basis of statement of correctness given by the filing company.�. Avinash K. Srivastava
[Issued by the Ministry of Corporate Affairs, vide Notification SO No. 2223(E), Published in the Gazette of India, Extraordinary, Part II, Section 3(ii), dated 26.09.2011]
Joint Secretary Notification of the Government of India, published in the Gazette of India, Part II, section 3, Sub-section (ii), dated the 13-5-1978 in the erstwhile Ministry of Law, Justice and Company Affairs (Department of Company Affairs) vide Number S.O. 1329, dated the 8-5-1978, namely :-
In exercise of the powers conferred by sub-section (2) of section 4A of the Companies Act, 1956 (1 of l956), the Central Government hereby further to make amendment in the
In the said Notification, after serial number 58 and entry relating thereto, the following serial number and entry shall be added, namely :-
3 Notified Public Financial Institutions
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last known address of such party’s authorised representative(s) resident in India, where he appears by such representative(s).” P.K. Malhotra Secretary
“59. Srei Infrastructure Finance Limited.” J.N. Tikku Joint Director
of Officers in SFIO for the Additions in Schedule-I annexed to the 4 Authorisation purpose of filing and conducting prosecution 6 Notification No. G.S.R. 978, dated the under the Companies Act 28.05.1963
[Issued by the Ministry of Corporate Affairs, vide Notification No. GSR 715(E), Published in the Gazette of India, Extraordinary, Part II, Section 3(i), dated 23.09.2011] In pursuance of sub-section (1) of section 621 of the Companies Act, 1956 (1 of 1956), the Central Government hereby authorise the following officers in the Serious Fraud Investigation Office, Ministry of Corporate Affairs, for the purposes of filing and conducting prosecution under the Companies Act, 1956, namely:1. Shri H.K. Pandey, Senior Assistant Director (Investigation) 2. Smt Sunita Narula, Assistant Director (Investigation) 3. Shri Om Prakash, Assistant Director (Investigation) 4. Shri D.K.Arora, Assistant Director (Investigation) 5. Smt Savita Sharma, Assistant Director (Investigation) Renuka Kumar Joint Secretary
5
Company Law Board Regulations, 2011
(Amendment)
[Issued by the Ministry of Corporate Affairs, vide Notification No.GSR 682(E), Published in the Gazette of India, Extraordinary, Part II, Section 3(i), dated 15.09.2011] In exercise of the powers conferred by sub-section (4B) and sub-section (6) of section 10E of the Companies Act, 1956 (1 of 1956), the Company Law Board hereby makes the following regulations further to amend the Company Law Board Regulations, 1991 namely :– 1. (1) These regulations may be called the Company Law Board (Amendment) Regulations, 2011. (2) They shall come into force on the date of their publication in the Official Gazette. 2. In the Company Law Board Regulations, 1991, after the proviso to sub-regulation (4) of regulation 29 the following proviso shall be inserted, namely :– “Provided further that service of an order on a foreign party resident outside India shall be deemed to be sufficiently served if a copy thereof is delivered or tendered or sent by post at the
[Issued by the Ministry of Corporate Affairs, vide Notification GSR No.679(E), Published in the Gazette of India, Extraordinary, Part II, Section 3(i), dated 14.09.2011] In exercise of the powers conferred by sub-sections (1) and (2) of section 620A of the Companies Act, 1956 (1 of 1956), the Central Government hereby directs that in Schedule-I annexed to the notification number G.S.R. 978, dated the 28-5-1963, after serial number 368 and the entries relating thereto, the following serial numbers and entries shall be added, namely:– (1)
(2)
“369 M/s. Sakthi Sivam Benefit Fund Limited, Shop Nos. 30 to 32, Divya Towers, Fort Main Road, Shevapet, Salem-636001 (Tamil Nadu) 370 M/s. St. Mary’s Benefit Fund Limited, No. 3, New Mahalipatti Road, Madurai-625001 (Tamil Nadu) 371 M/s. Udhayam Benefit Fund Limited, 115, Panakal Street, Kaveripattinam, Krishnagiri, Dharmapuri Distt.635112 (Tamil Nadu) 372 M/s. Krishnanvaka Benefit Fund Limited, 7/18, Sri Parthasarathy Temple Campus, Nandavanam, Thuckalay, Distt., Kanyakumari -629175 373 M/s. Mayiladuthurai Ramu Benefit Fund Limited, 1/ 60-B, Main Road, Sembanarkoil-609309 (Tamil Nadu) 374 M/s. Rasipuram Benefit Fund Limited, 50, Upstairs Pookadai Street, Rasipuram, Salem, Distt.-637408 (Tamil Nadu) 375 M/s. Thiruvathipuram Benefit Fund Limited, New No. 125, Old No.46-A, Gandhi Road, Cheyyar-604407 (Tamil Nadu) 376 M/s. Tamilnadu Benefit Fund Limited, 25-A, Narimedu Main Road, Narimedu, Madurai-625002 377 M/s. Thenmalar Benefit Fund Limited, No. 24-D-10, Sugar Mill Road, Alanganallur, Madurai-625502 378
M/s. Muthoothu Mini Nidhi Limited, No. 102,1st Floor (Copper Arch), 83, Infantry Road, Bangalore-560001
379 M/s. Mercury Benefit Fund Limited, 235, Main Road, Chinnamanur-625515
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380 M/s. V.D.S. Vijayaraj Benefit Fund Limited, No. 372, Car Street, Tiruvannamalai-606601 381 M/s. Sri Raghavendra Benefit Fund Limited, 66, Panakal Street, Kaveripatnam-635112, Krishnagiri (Distt. & Taluk), Tamil Nadu 382 M/s. C. R. Benefit Fund Limited, “JAYAPRIYA BUILDING”, 30, Main Road, Neyvcli-607802 (Tamil Nadu)” Renuka Kumar Joint Secretary
of Companies or LLPs which 7 Registration have one of their objectives to do business of
9 Company Law Settlement Scheme, 2011
[Issued by the Ministry of Corporate Affairs, vide General Circular No. 65/2011, dated 04.10.2011] In continuation of the Ministry’s General Circulars No. 59/ 2011 dated 05.08.2011 and No. 60/2011 dated 10.08.2011 on the subject cited above, it is stated that the said scheme has been extended upto 15th December, 2011. 2. All the terms and conditions of the General Circulars No. 59/2011dated 05.08.2011 and No. 60/2011 dated 10.08.2011 will remain the same. Monika Gupta Assistant Director
Architect [Issued by the Ministry of Corporate Affairs, vide Circular No. 17/165/2011-CL-V (PT.), dated 10.10.2011] I am directed to say that a number of representations have been received in the Ministry to the effect that the Registrar of Companies and the Registrar of LLPs are incorporating the companies and LLPs in contravention to the provisions of the Architect Act, 1972 that the Council of Architect (CoA). In terms of sections 36 and 37 of the Architects Act, 1972 as well as Rules and Regulations framed thereunder only an architect registered with the Council of Architecture or a firm of Architects (a partnership firm under the Partnership Act, 1932, comprising of all registered architects) can represent itself as an architect or use the title and style of architect of practicing the profession of an Architect in India with the exception of a landscape architect and naval architect. The matter is under examination in consultation with the Department of Legal Affairs. Pending finalization of view of the Central Government on the subject it is hereby directed incorporation of companies/LLPs where one of the objects of such entities is to carry on the business of architect be not proceeded with till further order. This issues with the approval of CAM. Seema Rath Assistant Director
of Director’s Identification 8 Allotment Number (DIN) under Companies Act, 1956 [Issued by the Ministry of Corporate Affairs, vide General Circular No. 66/2011, dated 04.10.2011] In continuation of General Circular No. 32/2011, dated 31-52011 on the subject cited matter, I am directed to say that the time for filing DIN-4 by DIN holders for furnishing the PAN and to update PAN details has been extended till 15-12-2011. Monika Gupta Assistant Director
‘In-person’ verification (IPV) of clients by subsidiaries of stock exchanges, acting as stock brokers
10
[Issued by the Securities and Exchange Board of India, vide Circular No.CIR/MIRSD/22/2011, dated 25.10.2011] 1. SEBI vide letter No. MIRSD/DPS-III/130466/2008 dated July 02, 2008 (addressed to the stock exchanges), mandated the stock brokers to carry out ‘in-person’ verification of their clients by their staff while registering them and also ensure that this function is not outsourced. 2. Subsequently, SEBI vide circular No. SEBI/MIRSD/Cir. No. 02/2010 dated January 18, 2010 clarified that the ‘in person’ verification done for opening beneficial owner’s account by a Depository Participant (DP) will hold good for opening trading account by a stock broker and vice versa, if the stock broker and DP is the same entity or if one of them is the holding or subsidiary company of the other. 3. The subsidiaries of stock exchanges have now requested SEBI to consider the ‘in-person’ verification carried out by their sub-brokers as due compliance with the aforesaid requirement since the said sub-brokers are also the stock brokers of the parent stock exchange and the subsidiaries are not permitted to register direct clients. 4. The matter has been examined and considering their distinctive structure, it is clarified that the subsidiaries of stock exchanges, acting as stock brokers, may rely upon the ‘in-person’ verification done by their sub-brokers (who are also registered with SEBI as stock brokers of the parent stock exchange) for their respective clients. However, the ultimate responsibility for ‘in-person’ verification would remain with the subsidiaries and they shall obtain the necessary IPV documents for their records. 5. The stock exchanges are advised to: (a) bring the provisions of this circular to the notice of the
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stock brokers and also disseminate the same on their websites; (b) make necessary amendments to the relevant bye-laws, rules and regulations for the implementation of the above decision in co-ordination with one another to achieve uniformity in approach; and (c) communicate to SEBI, the status of the implementation of the provisions of this circular in the Monthly Development Report of the following month. 6. This circular is issued in exercise of powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 to protect the interests of investors in securities and to promote the development of, and to regulate the securities markets and shall come into effect from the date of this circular. 7. This circular is available on SEBI website at www.sebi.gov.in under the categories “Legal Framework” and “Circulars”. V.S. Sundaresan Chief General Manager
format under Regulation 11 of 11 Reporting Securities Contracts (Regulation) (Manner of Increasing and Maintaining Public Shareholding in Recognised Stock Exchanges) Regulations, 2006 [Issued by the Securities and Exchange Board of India, vide Circular No.CIR/MRD/DSA/12/2011, dated 24.10.2011] 1. Securities Contracts (Regulation) (Manner of Increasing
and Maintaining Public Shareholding in Recognised Stock Exchanges) Regulations, 2006 hereinafter referred as ‘MIMPS Regulations’ were notified on November 13, 2006 and came into force from the date of publication. 2. Regulation 11 of MIMPS Regulations inter alia prescribes certain obligations on the recognised stock exchanges pertaining to their shareholding including submission of a report to SEBI within 15 days from the end of each quarter. 3. In this regard, it has been observed that stock exchanges have been submitting the said report in different formats. Accordingly, it has been decided to standardize the format of reporting of shareholding pattern of the recognised stock exchange under MIMPS Regulations. 4. The stock exchanges are therefore advised to ensure the submission of the report under MIMPS Regulations on a quarterly basis within the aforesaid prescribed time period, as per the format given at Annexure-A. 5. The stock exchanges are directed to communicate to SEBI, the status of the implementation of the provisions of this circular in their Monthly / Quarterly Development Report. 6. This circular is issued in exercise of powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 read with Section 12A of Securities Contracts (Regulation) Act, 1956, to protect the interests of investors in securities and to promote the development of, and to regulate the securities markets. 7. This circular is available on SEBI website at www.sebi.gov.in. Rajesh Kumar D Deputy General Manager
Annexure A Report under Regulation 11(2) under Securities Contracts (Regulation) (Manner of Increasing and Maintaining Public Shareholding in Recognised Stock Exchanges) Regulations, 2006. [Quarter ended..........................] A. Top ten shareholders during the quarter Sl. No.
Name of the shareholder
Number of shares held at the end of the quarter
Percentage of shareholding
1 2 B. Shareholders falling under Regulation 8 who have acquired shares during the quarter Sl. No.
Name of the shareholder who acquired shares
Name of the shareholder from whom shares acquired
Number of shares acquired during the quarter
Percentage of shareholding after the acquisition
1 2 1612
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C. Category wise shareholding pattern in the recognised stock exchange (alongwith the names of the shareholders i. TRADING MEMBERS Sl. No.
Category of shareholder
No. of shareholders
Total number of shares
Percentage of shares
No. of shareholders
Total number of shares
Percentage of shares
Individuals 1 2 Corporates (Listed) 1 Corporates (Unlisted) 1 Banks (wherever permitted) 1 Any other (specify) Total (A) ii. ASSOCIATES OF TRADING MEMBERS Sl. No.
Category of shareholder Individuals
1 2 Corporates (Listed) 1 Corporates (Unlisted) 1 HUF 1 Trust 1 Financial Institutions/Banks 1 Foreign Holding(FDI) 1 Foreign Holding (FII) 1 Any other (specify) Total (B) TOTAL (A+B) 1613
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iii. PUBLIC SHAREHOLDING Sl. No.
Category of shareholder
No. of shareholders
Total number of shares
Percentage of shares
Individuals 1 2 Corporates (Listed) 1 Corporates (Unlisted) 1 HUF 1 Trust 1 Financial Institutions/Banks 1 Foreign Holding(FDI) 1 Foreign Holding (FII) 1 Any other(specify) Insurance Companies 1 Mutual Funds 1 Venture Capital Fund 1 Any other (specify) Total (C) Grand Total(A)+(B)+(C) D. SHAREHOLDERS ACTING IN CONCERT The exchange shall indicate the shareholding pattern in the format given below in respect of each set of shareholders, in case they hold shares alongwith persons acting in concert Sl. No.
Name of the shareholder
Category of shareholders
Details of holding Number of shares Percentage
1 2 3
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UNDERTAKING UNDER REGULATION 11 E. The Managing Director / Executive Director of the recognised stock exchange shall submit an undertaking confirming the compliance of the provisions Regulation 11(1) of Securities Contracts (Regulation) (Manner of Increasing and Maintaining Public Shareholding in Recognised Stock Exchanges) Regulations, 2006 to SEBI on a quarterly basis within fifteen days from the end of each quarter.
SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (The Regulations)
12
1. This is in continuation of the circular No SEBI/CFD/DCR/ SAST/ 1/2011/09/23 dated September 23, 2011 on the captioned Regulations wherein various formats for the reports/ disclosures to be filed were specified. The formats for disclosures for acquisition and disposal of shares under Regulation 29 (1) and 29 (2) of the Regulations, which have since been finalized are placed as Annexure-A and AnnexureB respectively. 2. A copy of this circular and the above stated formats are available on SEBI website at www.sebi.gov.in under the categories “Legal Framework” and “Takeovers”. Neelam Bhardwaj General Manager
[Issued by the Securities and Exchange Board of India, vide Circular No.SEBI/CFD/DCR/SAST/2/2011/10/20, dated 20.10.2011] Annexure-A
Format for Disclosures under Regulation 29(1) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 1. Name of the Target Company (TC) 2. Name(s) of the acquirer and Persons Acting in Concert (PAC) with the acquirer 3. Whether the acquirer belongs to Promoter/Promoter group 4. Name(s) of the Stock Exchange(s) where the shares of TC are Listed 5. Details of the acquisition of shares/voting rights/holding of the Acquirer and PAC
Number
% w.r.t.total share/voting capital wherever applicable
% w.r.t. total diluted share/ voting capital of the TC (*)
Before the acquisition under consideration, holding of : (a) Shares carrying voting rights b) Voting rights (VR) otherwise than by equity shares (c) Warrants/convertible securities/any other instrument that entitles the acquirer to receive shares carrying voting rights in the TC (specify holding in each category) Total (a+b+c) Details of acquisition (a) Shares carrying voting rights acquired (b) VRs acquired otherwise than by equity shares (c) Warrants/convertible securities/any other instrument that entitles the acquirer to receive shares carrying voting rights in the TC (specify holding in each category) acquired Total (a+b+c) 1615
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After the acquisition, holding of: (a) Shares carrying voting rights (b) VRs otherwise than by equity shares (c) Warrants/convertible securities/any other instrument that entitles the acquirer to receive shares carrying voting rights in the TC (specify holding in each category) after acquisition Total (a+b+c) 6. Mode of acquisition (e.g. open market / public issue / rights issue / preferential allotment / inter-se transfer, etc.) 7. Date of acquisition of/ date of receipt of intimation of allotment of shares/ VR/ warrants/convertible securities/any other instrument that entitles the acquirer to receive shares in the TC. 8. Equity share capital / total voting capital of the TC before the said acquisition 9. Equity share capital/ total voting capital of the TC after the said acquisition 10. Total diluted share/voting capital of the TC after the said acquisition Note: (*) Diluted share/voting capital means the total number of shares in the TC assuming full conversion of the outstanding convertible securities/warrants into equity shares of the TC. Signature of the acquirer / Authorised Signatory Place: Date: Annexure-B Format for disclosures under Regulation 29(2) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 1. Name of the Target Company (TC) 2. Name(s) of the acquirer and Persons Acting in Concert (PAC) with the acquirer 3. Whether the acquirer belongs to Promoter/Promoter group 4. Name(s) of the Stock Exchange(s) where the shares of TC are Listed 5. Details of the acquisition/disposal/holding of shares/voting rights/ holding of the Acquirer and PAC
Number
% w.r.t.total share/voting capital wherever applicable
% w.r.t. total diluted share/ voting capital of the TC (*)
Before the acquisition/disposal under consideration, holding of : (a) Shares carrying voting rights (b) Voting rights (VR) otherwise than by shares (c) Warrants/convertible securities/any other instrument that entitles the acquirer to receive shares carrying voting rights in the T C (specify holding in each category) 1616
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Total (a+b+c) Details of acquisition/sale (a) Shares carrying voting rights acquired/sold (b) VRs acquired /sold otherwise than by shares (c) Warrants/convertible securities/any other instrument that entitles the acquirer to receive shares carrying voting rights in the TC (specify holding in each category) acquired/sold Total (a+b+c) After the acquisition/sale, holding of: (a) Shares carrying voting rights (b) VRs otherwise than by shares (c) Warrants/convertible securities/any other instrument that entitles the acquirer to receive shares carrying voting rights in the TC (specify holding in each category) after acquisition. Total (a+b+c) 6. Mode of acquisition/sale (e.g. open market/off-market/public issue/rights issue/preferential allotment/inter-se transfer etc). 7. Date of acquisition/sale of shares/VR or date of receipt of intimation of allotment of shares, whichever is applicable 8. Equity share capital/total voting capital of the TC before the said acquisition/sale 9. Equity share capital/total voting capital of the TC after the said acquisition/ sale 10. Total diluted share/voting capital of the TC after the said acquisition/sale. (*) Diluted share/voting capital means the total number of shares in the TC assuming full conversion of the outstanding convertible securities/warrants into equity shares of the TC. Signature of the acquirer / seller / Authorised Signatory Place: Date:
1. It is observed from the information provided by the depositories that the companies listed in Annexure ‘A’ have established connectivity with both the depositories.
(a) At least 50% of other than promoter holdings as per clause 35 of Listing Agreement are in dematerialized mode before shifting the trading in the securities of the company from TFTS to normal Rolling Settlement. For this purpose, the listed companies shall obtain a certificate from its Registrar and Transfer Agent (RTA) and submit the same to the stock exchange/s. However, if an issuer-company does not have a separate RTA, it may obtain a certificate in this regard from a practicing company Secretary/Chartered Accountant and submit the same to the stock exchange/s.
2. The stock exchanges may consider shifting the trading in these securities to normal Rolling Settlement subject to the following:
(b) There are no other grounds/reasons for continuation of the trading in TFTS.
Establishment of Connectivity with both depositories NSDL and CDSL - Companies eligible for shifting from Trade for Trade Settlement (TFTS) to normal Rolling Settlement
13
[Issued by the Securities and Exchange Board of India, vide Circular No.CIR/MRD/DP/11/2011, dated 14.10.2011]
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3. The Stock Exchanges are advised to report to SEBI, the action taken in this regard in the Monthly/Quarterly Development Report. Harini Balali Deputy General Manager Annexure A Sl. No.
Name of the Company
ISIN
1.
Jalan Metallurgical Ltd.
INE908L01013
2.
Vaibhav Heavy Vehicles Ltd.
INE567E01012
3.
Pankhil Finlease Ltd.
INE156M01017
4.
LWS Knitwear Ltd.
INE281M01013
5.
Galaxy Agrico Exports Ltd.
INE803L01016
6.
ABC Gas (International) Ltd.
INE173M01012
7.
Confidence Trading Company Ltd.
INE180M01017
8.
Integrated Proteins Ltd.
INE177M01013
9.
Trendy Knitwear Ltd.
INE219M01013
10.
TCL Technologies Ltd.
INE094M01010
11.
Apis India Ltd.
INE070K01014
12.
The Bisra Stone Lime Company INE719E01019 Ltd.
13.
Dhvanil Chemicals Ltd.
INE008M01010
14.
JRI Industries & Infrastructure Ltd.
INE022M01011
15.
Sree Satyanarayana Spinning Mills Ltd.
INE563E01011
16.
Rapid Investments Ltd.
INE154M01012
17.
Tirupati Industries (India) Ltd.
INE329E01017
18.
Narven Finance and Investments Ltd.
INE984L01014
19.
Modella Woollens Ltd.
INE380D01012
20.
Malay Commercial Enterprises Ltd.
INE505L01017
2. In case of Mutual Funds, Portfolio Managers, Collective Investment Schemes and Venture Capital Funds, though certain basic requirements have been prescribed for Customer Due Diligence (CDD) or Know Your Client (KYC), no specific KYC format has been prescribed. As a result, these intermediaries use different KYC formats and supporting documents. 3. SEBI has recently initiated steps in this direction in consultation with major stock exchanges, depositories, AMFI and market participants. In case of stock brokers (and also for the stock brokers who are depository participants), the account opening process for investors has been simplified vide SEBI Circular No. CIR/MIRAD/16/2011 dated August 22, 2011 (available on SEBI website), KYC form capturing the basic details about the client has been prescribed as Part I of the account opening form and additional information specific to dealing in the stock exchange(s) are obtained in Part II of the form. 4. With a view to bring about uniformity in securities markets, it has also been decided that the same KYC form and supporting documents shall also be used by all captioned SEBI registered intermediaries. The KYC form as given in Annexure-1 shall be filled by an investor at the account opening stage while dealing with any of the above intermediaries. Additional details specific to the area of activity of the intermediary being obtained now but not covered in the KYC form shall also be obtained from the investors in Part II of the account opening form. 5. The additional information (Part II) shall be prescribed by Depositories for their depository participants and by Association of Mutual Funds in India (AMFI) for all mutual funds. The Portfolio Managers, Venture Capital Funds, and Collective Investment Schemes shall capture the additional information specific to their area of activities, as considered appropriate by them. The intermediaries shall also continue to abide by Circulars issued by SEBI from time to time for prevention of money laundering. 6. The intermediaries shall take necessary steps to implement this circular and ensure its full compliance in respect of all new clients from January 1, 2012.
Know Your Client (KYC) 14 Uniform Requirements for the Securities Markets [Issued by the Securities and Exchange Board of India, vide Circular No.MIRSD/SE/Cir-21/2011, dated 05.10.2011] 1. SEBI has been getting feedback from the investors that various SEBI registered intermediaries follow different KYC requirements.
7. The Depositories are also directed to bring the provisions of this circular to the notice of their Depository Participants, make necessary amendments to the relevant bye-laws, rules and regulations for the implementation of the above decision in coordination with each other and verify its compliance through internal audits and inspections. 8. This circular is issued in exercise of powers conferred under
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(GN - 350) NOVEMBER 2011
Section 11(1) of the Securities and Exchange Board of India Act, 1992 to protect the interests of investors in securities and to promote the development of, and to regulate the securities markets.
vide their circular dated April 29, 2011, it has been decided that instead of supplying complete and full annual reports to all the shareholders, listed entities shall supply:
B.N. Sahoo
(i) soft copies of full annual reports to all those shareholders who have registered their email addresses for the purpose;
Deputy General Manager ANNEXURE I – KYC Application Form*
15
(ii) hard copy of abridged annual reports to others and
Amendments to the Equity, IDR and SME Equity Listing Agreements
(iii) hard copies of full annual reports to those shareholders, who request for the same.
[Issued by the Securities and Exchange Board of India, vide Circular No.CIR/CFD/DIL/7/2011, dated 05.10.2011]
(d) Insertion of Clause 35A - Disclosure of voting results by listed entities
1. In line with the objective to enhance the quality of disclosures made by listed entities, certain amendments are hereby carried out to the Equity Listing Agreement, Model Listing Agreement for Indian Depository Receipts and Model SME Equity Listing Agreement (hereinafter referred to as the “Listing Agreements”).
In order to ensure wider dissemination of information regarding voting results, listed entities shall disclose their voting results in the prescribed format, to the exchanges and also place the same on their websites, within 48 hours from the conclusion of the concerned shareholders’ meeting. To begin with, this requirement shall be applicable to top 500 listed entities based on market capitalization computed as on the date of this circular.
2. The full texts of amendments to be effected in the Listing Agreements are given at Annexure. Some of the amendments are as under:(a) Amendments to Clause 41 - Disclosure of quarterly financial results
3. Applicability (a) Provisions of Paras 2(a), 2(b) and 2(c) shall be applicable with effect from the quarter/financial year ending on December 31, 2011.
(i) In order to give a better comparative picture of the quarterly financial results, listed entities shall disclose figures in respect of immediately preceding quarter as well in addition to the existing requirements.
(b) Provisions of Para 2(d) shall be applicable for all the shareholders’ meetings, for which notices are issued on or after January 01, 2012. Stock Exchanges are advised to notify the list of entities for whom the said provision would be applicable based on the criteria specified at 2(d) above.
(ii) Listed entities shall also submit the last quarter results along with the audited annual results. (b) Amendments to Clause 41 - Submission of financial results It is being observed that certain listed entities, while submitting their interim financial results, submit unaudited financials first and subsequently submit the limited review report after a lag. It is hereby clarified that submission of unaudited results shall be accompanied by the limited review report of the auditors. (c) Amendments to Clause 32 - Mode of Supplying Annual Reports to Shareholders In modification of SEBI circular no. SEBI/CFD/DIL/ LA/2/2007/26/4 dated April 26, 2007 and in line with the green initiative of Ministry of Corporate Affairs
4. The above listing conditions are specified in exercise of the powers conferred under Section 11 read with Section 11A of the Securities and Exchange Board of India Act, 1992. The said listing conditions should form part of the existing Listing Agreements of the stock exchange. 5. All stock exchanges are advised to ensure compliance with this circular and carry out the amendments in their Listing Agreement as per the Annexure to this circular. 6. This circular is available on SEBI website at www.sebi.gov.in under the categories “Legal Framework” and “Issues and Listing”.
*Not reproduced here. Log on to sebi.gov.in for Annexure 1.
1619
Sunil Kadam General Manager (GN - 351) NOVEMBER 2011
Annexure
(iii) Hard copies of full annual reports to those shareholders, who request for the same.”
Amendments to Equity Listing Agreement 1. In Clause 5A, sub-clause (II), Para (a), the words “captured in depository’s database” may be replaced by the words “last available address as per company’s/registrar’s record”.
3. After Clause 35, a new Clause 35A may be inserted, viz.,
2. In Clause 32, the para which reads “The Company will send a statement containing the salient features of the Balance Sheet, Profit and Loss Account and Auditors’ Report to each shareholder: Provided that, the company on receipt of written request from a shareholder, shall send the complete and full Balance Sheet, Profit & Loss Account and Auditors’ Report to the said shareholder.”,
“35A. The issuer agrees to submit to the stock exchange, within 48 hours of conclusion of its General Meeting, details regarding the voting results in the following format : Date of the AGM/EGM:................................... Total number of shareholders on record date: No. of Shareholders present in the meeting either in person or through proxy: Promoters and Promoter Group: Public:
shall be substituted with the following: “The issuer shall supply: (i) Soft copies of full annual reports containing its Balance Sheet, Profit & Loss account and Directors’ Report to all those shareholder(s) who have registered their email address(es) for the purpose; (ii) Hard copy of statement containing the salient features of all the documents, as prescribed in sub-clause (iv) of clause (b) of proviso to section 219 of the Companies Act, 1956 to those shareholder(s) who have not so registered;
No. of Shareholders attended the meeting through Video Conferencing Promoters and Promoter Group: Public: (Agenda-wise) Detail of the Agenda: Resolution required: (Ordinary/Special) Mode of voting: (Show of hands/Poll/Postal ballot/Evoting)
In case of Poll/Postal ballot/E-voting: Promoter/Public
No. of shares held (1)
No. of votes polled (2)
% of Votes Polled on outstanding shares (3)=[(2)/(1)]* 100
No. of Votes in favour (4)
No. of Votes against (5)
% of Votes in favour on votes polled (6)=
% of Votes against on votes polled (7)=
[(4)/(2)]*100 [(5)/(2)]*100
Promoter and Promoter Group Public Institutional holders Public-Others Total 4. In Clause 41 of the Equity LA:(a) In Sub-Clause (I) in Para (c), Sub-Para (i) shall be substituted with the following: “In case the issuer opts to submit unaudited financial results, they shall be subjected to limited review by the 1620
statutory auditors of the issuer (or in case of public sector undertakings, by any practicing Chartered Accountant) and such limited reviewed results (financial results accompanied by the limited review report) shall be submitted within forty-five days from the end of the quarter.” (GN - 352) NOVEMBER 2011
(b) In Sub-Clause (I), Para (d) may be substituted with the following:
figures in respect of the full financial year and the published year to date figures upto the third quarter of the current financial year.”
(d) “The issuer shall submit audited financial results for the entire financial year, within sixty days of the end of the financial year. The issuer shall also submit the audited financial results in respect of the last quarter alongwith the results for the entire financial year, with a note that the figures of last quarter are the balancing figures between audited Particulars
3 months ended
Previous 3 months ended
(c) In Sub-Clause (I) in Para (e), in Sub-Para (ii), the term “...under item (c)” shall be substituted with “...under item (d)”. (d) The header row in Annexure I, II, III and IV may be substituted with the following to inter-alia disclose the immediately preceding quarter results, viz.: Year to date figures for current period ended (dd/mm/yyyy)
Year to date figures for the previous year ended (dd/mm/yyyy)
Previous accounting year ended
(dd/mm/yyyy) (dd/mm/yyyy)
Correspg 3 months ended in the previous year (dd/mm/yyyy)
Audited/ Unaudited*
Audited/ Unaudited*
Audited/ Unaudited*
Audited/ Unaudited*
Audited/ Unaudited*
Audited/ Unaudited
Amendment to the Model SME Equity Listing Agreement
the financial year. The issuer shall also submit the audited financial results in respect of the last half year alongwith the results for the entire financial year, with a note that the figures of last year is the balancing figure between audited figures in respect of the full financial year and the previous half year.”
5. In Clause 34 of the Model SME Equity Listing Agreement, Para (a) may be substituted with: “The issuer shall supply: (i) Soft copies of full annual reports containing its Balance Sheet, Profit & Loss account and Directors’ Report to all those shareholder(s) who have registered their email address(es) for the purpose; (ii) Hard copy of statement containing the salient features of all the documents, as prescribed in sub-clause (iv) of clause (b) of proviso to section 219 of the Companies Act, 1956 to those shareholder(s) who have not so registered; (iii) Hard copies of full annual reports to those shareholders, who request for the same.” 6. In Clause 43, in Sub-Clause (I),
(dd/mm/yyyy)
(iii) In Para (e), in Sub-Para (ii), the term “...under item (c)” shall be substituted with “...under item (d)”. Amendment to Model Listing Agreement for Indian Depository Receipts 7. In Clause 36, Sub-Clause (a) of the Model Listing Agreement for Indian Depository Receipts may be substituted with: “ (a) to send to its IDR Holders, copies of annual report at the same time when it is made available to its shareholders, as per the requirement of its home country and the other jurisdictions where its securities are listed, in the following manner:
(i) In Para (c), Sub-Para (i) may be substituted with: “In case the issuer opts to submit unaudited financial results, they shall be subjected to limited review by the statutory auditors of the issuer (or in case of public sector undertakings, by any practicing Chartered Accountant) and such limited reviewed results (financial results accompanied by the limited review report) shall be submitted within forty-five days from the end of the half year.” (ii) Para (d) may be substituted with: “The issuer shall submit audited financial results for the entire financial year, within sixty days of the end of 1621
(i) Soft copies of full annual reports containing its Balance Sheet, Profit & Loss account and Directors’ Report to all those IDR Holders who have registered their email address(es) for the purpose; (ii) Hard copy of abridged annual report (including convenience translation into Indian Rupees as mentioned in sub-clause (h)), to those IDR Holder(s) who have not registered their email address(es), if the format for abridged annual report is specified by home country or the other jurisdictions, where its securities are listed; (GN - 353) NOVEMBER 2011
(iii) Hard copy of full annual report to those IDR Holder(s) who have not registered their email address(es), if no such format for abridged annual report is specified by the home country or the other jurisdictions where its securities are listed.
5. This circular is issued in exercise of powers conferred by sub-section (1) of Section 11 of the Securities and Exchange Board of India Act, 1992, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.
Issuer further agrees to ensure that the IDR Holders are able to receive a copy of Annual Report from the domestic depository or Compliance Officer, on request. The full Annual Report shall contain the Board’s report, Balance Sheet, Profit and Loss Account, the Auditor’s Report and such other report which is required to be sent to security holders annually as per the requirements of its home country thereon. The issuer further agrees to simultaneously file the same with the stock exchange;”
6. This circular is available on SEBI website at www.sebi.gov.in
16
Clarification on 100% promoter holding in demat form
[Issued by the Securities and Exchange Board of India, vide Circular No.SEBI/Cir/ISD/ 05 /2011, dated 30.09.2011] 1. This is further to SEBI circular SEBI/Cir/ISD/3 /2011 dated June 17, 2011 regarding 100% promoter holding in demat form. 2. On review of the promoters holding in demat form it has been observed that there has been improved compliance to the above circular and the companies/promoters have started the process of converting their physical holdings in dematerialized form. At the same time representations have been received from large number of companies as well as various industry bodies regarding practical difficulties being faced in dematerializing promoters holding and seeking exemptions/ extension in complying with the provisions. 3. In light of above, it has been decided to extend the current deadline by one quarter i.e. quarter ending December 2011. 4. The Stock Exchanges are advised to:
put in place the adequate systems and issue the necessary guidelines to the market for implementing the above decision.
make necessary amendments to the relevant bye-laws, rules and regulations for the implementation of the above decision immediately.
bring the provisions of this circular to the notice of the member brokers of the Exchange and also to disseminate the same on the website.
communicate to SEBI, the status of the implementation of the provisions of this circular in a Monthly Report.
S. Ramann Executive Director
17
Revisions in FII Investments in corporate debt long term infra category
[Issued by the Securities and Exchange Board of India, vide Circular No.CIR/IMD/FIIC/18 /2011, dated 30.09.2011] 1. Please refer to SEBI circular IMD/FII&C/5/2011 dated March 31, 2011 wherein the enhanced debt investment limits for FII investment in corporate debt long term infra category, and the modalities for allocation was specified. 2. Reference is drawn to SEBI circular IMD/DF/14/2011 dated August 09, 2011 allowing Qualified Foreign Investor (QFI) in Mutual Fund Schemes to invest in debt schemes which invest in infrastructure debt upto a total ceiling of USD 3 billion out of the total long term corporate infrastructure limits of USD 25 billion. 3. Government of India vide its press release dated September 12, 2011 modified the aforesaid long term infrastructure limits and thus the following bifurcation of the long terms infrastructure limits of USD 22 billion is advised:One year lock in & one year residual maturity 4. USD 5 billion is earmarked for FII investments in those bonds that have an initial maturity of 5 years or more at the time of issue and a residual maturity of 1 year at the time of first purchase by an FII. These investments are subject to a lock in period of 1 year wherein FIIs can trade amongst themselves but cannot sell to domestic investors during lock in period. Three year lock in & three year residual maturity 5. The remaining USD 17 billion limits available to FIIs can be invested in Long term infra bonds which have an initial maturity of 5 years or more at the time of issue and residual maturity of 3 years at the time of first purchase by an FII. These investments are subject to a lock in period of 3 years wherein FIIs can trade amongst themselves but cannot sell to domestic investors during the lock in period. Reckoning of limits for Infrastructure Debt Funds (IDFs) 6. Investment by FIIs in infrastructure debt fund schemes under
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(GN - 354) NOVEMBER 2011
the IDF route shall be reckoned under USD 17 billion as mentioned at para 5 above.
(a) In partial amendment to clause 3 (h) of the aforesaid circular IMD/FII & C/37/2009, no single entity shall be allocated more than INR 2,000 cr. of the investment limit. Where a single entity bids on behalf of multiple entities, in terms of para 7 of SEBI circular CIR/IMD/ FIIC/18 /2010 dated November 26, 2010, then such bid would be limited to INR 2,000 cr. for every such single entity.
7. For sake of clarity the following is the depiction of the USD 25 billion infrastructure long terms debt limits applicable as on September 12, 2011: FII Investment limit in corporate debt long term infra category as on September 12, 2011 Type of investment route
Upper cap in USD bn
In INR Crs
Total long term infra
25
1,12,095
QFI investment in debt (Including investment in IDF)
3
13,451
(c) The fees for the bidding process shall be remitted to SEBI by the respective custodians of the entities by October 12, 2011.
One year lock in with one year residual maturity by FIIs
5
22,419
11. Time period for utilization of USD 5 billion limit for FII investments in terms of para 4 shall be as per SEBI circular IMD/FII&C/18/2010 dated November 26, 2010.
76,225
This circular is issued in exercise of the powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act 1992, read with Section 10 of the Securities Contracts (Regulation) Act, 1956 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.
Three year lock in with three 17 year residual maturity by FIIs (including investment in IDF)
(b) In partial amendment to clause 3 (c) and 3(d) of the aforesaid circular IMD/FII &C/ 37/2009, the minimum amount which can be bid for shall be INR 50 cr.
8. It is to be clarified that as per convention, in case of bonds that have embedded options, such as bonds with put and call options, the date of the put/ call shall be determined as the maturity date for the purpose of calculating residual maturity. Manner of allocation 9. In terms of para 6 of the circular of even number dated March 31, 2011, “Flls/sub-accounts were allowed to avail of the investment limits without obtaining SEBI approval till overall FII investments reaches 90% (ninety percent) “. In partial modification of para 6 of the aforesaid circular IMD/ FII&C/5/2011 that Flls/sub-accounts can now avail of the debt limits under the corporate bonds long term infra category which have an initial maturity of 5 years or more at the time of issue and residual maturity of 3 years at the time of first purchase by an FII, without obtaining SEBI approval till the overall FII investment reaches 90% (ninety percent) of USD 17 billion i.e. USD 15.3 billion. After reaching this limit of USD 15.3 billion the bidding process mention in circular dated November 26, 2010 shall be initiated for allocation of remaining limits. Allocation of USD 5 billion limit 10. Allocation of entire USD 5 billion limit for FII investments in terms of para 4 above shall be through the bidding process on the NSE from 15:30 hrs to 17:30 hrs, on October 07, 2011, in terms of SEBI circular IMD/FII&C/37/2009 dated February 06, 2009, subject to the modifications stated below:-
A copy of this circular is available at the web page “F.I.I.” on our website www.sebi.gov.in. The custodians are requested to bring the contents of this circular to the notice of their FII clients. Jeevan Sonparote General Manager
for Issue and Listing of 18 Guidelines Structured Products/ Market Linked Debentures [Issued by the Securities and Exchange Board of India, vide Circular No.Cir./IMD/DF/17/2011, dated 28.09.2011] 1. SEBI had prescribed initial and continuous disclosure norms applicable to issue and listing of debt securities through the Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008 and the Simplified Listing Agreement for Debt Securities. 2. It has been observed that a variety of hybrid securities that combine features of plain vanilla debt securities and exchange traded derivatives are being issued through private placements and listed on stock exchanges. It is seen that such securities differ from plain vanilla debt securities or debt securities issued with embedded call or put options, i.e., by offering market
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(GN - 355) NOVEMBER 2011
linked returns obtained through exposures on exchange traded derivatives. Since such returns are linked to equity markets, such securities are also called equity linked debentures or stock linked debentures etc.
showing value of the security under different market conditions such as rising, stable and falling market conditions shall be disclosed in a table along with a suitable graphic representation.
3. In view of the fact that such securities are different in their nature and their risk- return relationship, it has been decided to specify additional disclosures and other requirements in offer documents for issue of structured products/ market linked debentures that seek listing on stock exchanges.
(iii) A risk factor shall be prominently displayed that such securities are subject to model risk, i.e., the securities are created on the basis of complex mathematical models involving multiple derivative exposures which may or may not be hedged and the actual behavior of the securities selected for hedging may significantly differ from the returns predicted by the mathematical models.
4. The following conditions shall be complied with in respect of listing of structured debt/ equity linked debentures: (a) Applicability: These guidelines shall be applicable to ‘structured products’ or ‘market linked debentures’, by whatever name they are called including all such securities that have an underlying principal component in the form of debt securities as defined under R.2(d) of SEBI (Issue and Listing of Debt Securities) Regulations, 2008 and where the returns are linked to market returns on other underlying securities/ indices. (b) Securities which do not promise to return the principal amount in full at the end of the tenor of the instrument, i.e., ‘principal non-protected’ shall not be considered as debt securities under R.2(d) of SEBI (Issue and Listing of Debt Securities) Regulations, 2008 and therefore will not be eligible for issue and listing under the said regulations. (c) Eligibility criteria for issuers: As such securities expose the issuer to market risk, the issuer should have a minimum net worth of at least Rs.100cr. (d) Minimum Ticket Size: While the issuers are free to determine the face value for such securities, no invitations for subscription or allotments shall be made for an amount less than Rs.10lakh in any issue. (e) Disclosure Requirements: In addition to the disclosure requirement specified under Schedule I of Debt Regulations read with Regulation 21(1) of the SEBI (Issue and Listing of Debt Securities) Regulations, the following additional disclosures shall be made in all offer documents for such securities: (i) Credit rating by any registered Credit Rating Agency shall bear a prefix ‘PP-MLD’ denoting Principal Protected Market Linked Debentures followed by the standardized rating symbols for long/ short term debt on the lines specified in SEBI Circular No. CIR/MIRSD/4/2011 dated June 15, 2011. (ii) A detailed scenario analysis/ valuation matrix 1624
(iv) A risk factor shall be prominently displayed stating that in case of Principal/ Capital Protected Market Linked Debentures, the principal amount is subject to the credit risk of the issuer whereby the investor may or may not recover all or part of the funds in case of default by the issuer. (v) Where indicative returns/ interest rates are mentioned in the information memorandum in percentage terms, such figures shall be shown only on annualized basis. (vi) It shall be disclosed therein that the latest and historical valuation for such securities shall be made available on the websites of the issuer and of the valuer appointed for the purpose. (vii) All commissions by whatever name called, if any, paid by issuer to distributor for selling/ distribution of such securities to end investors shall be disclosed in the offer document. (viii) Conditions for premature redemption of such securities, if any, shall be clearly disclosed in the offer document. (f) Appointment of third party valuation agency (i) It shall be mandatory for the issuer to appoint a third party valuation agency which shall be a credit rating agency registered with SEBI. (ii) This valuer shall publicly publish on its website and provide to the issuer value of the securities at a frequency which is not less than once in a calendar week. Also, the issuer shall arrange to provide to an investor the value whenever investor asks for it. (iii) The cost incurred for valuation shall be disclosed in the offer document. At no point in time shall the issuer charge the investor for such services. (GN - 356) NOVEMBER 2011
(iv) The issuer shall also make the valuations available on its website. (g) Primary Issuance and sale of securities to retail investors: The issuer shall ensure that such securities are sold to retail investors with the following safeguards. (i) The intermediary who sells the security to the retail investor shall be a SEBI regulated entity. (ii) The intermediary shall ensure that investor understands the risks involved, is capable of taking the risk posed by such securities and shall satisfy itself that securities are suitable to the risk profile of the investor. (iii) The intermediary shall provide to the investor the offer document, whether or not the investor has made a specific request for the same. (iv) The intermediary shall provide the investor guidance on obtaining valuation for the securities, i.e., the locations where such information would be available (issuer or the third party). (v) The intermediary shall provide the investor with guidance on exit loads/ exit options/ liquidity support, if any, etc., being provided by the issuer or through the secondary market. 5. The Recognized Stock Exchanges are directed to:
9. This circular is issued in exercise of powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 read with Regulation 31(2)(c) of SEBI (Issue and Listing of Debt Securities) Regulations, 2008. 10. This circular is available on SEBI website at www.sebi.gov.in under the category “Legal Framework” and under the drop down “Corp Debt Market”. Maninder Cheema Deputy General Manager
Filing Offer Documents with SEBI under SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009
19
[Issued by the Securities and Exchange Board of India, vide Circular No.CIR/CFD/DIL/6/2011, dated 28.09.2011] 1. Please refer to SEBI Circular Nos. SEBI/CFD/ICDRR/2/ 2009/29/09 and CIR/CFD/DIL/9/2010 dated September 29, 2009 and October 13, 2010 respectively on the captioned subject. 2. As a green initiative, it has been decided to reduce the number of copies of offer documents being submitted to SEBI. Also, considering the availability of the soft copies of the offer documents in the websites of SEBI and the concerned merchant bankers, it is hereby prescribed as under:-
(a) Put in place necessary processes to ensure compliance with the aforesaid disclosure requirements while granting in-principle/ final approval for listing of such securities.
(a) Three copies of the draft offer document shall be filed with the relevant office of the Board. (b) One copy of the offer document shall be filed with the relevant office of the Board.
(b) Create wide publicity among companies listed on the exchange and make available suitable ‘Frequently Asked Questions’ for information/ education of investors visiting the websites of the exchange.
3. All the other provisions of the above mentioned circulars remain unchanged.
(c) Make consequential changes, if any, to the bye-laws of the Exchange and the clearing corporation of the exchange, as may be applicable and necessary.
The above provisions shall be applicable for all draft/final offer documents filed with SEBI on or after the date of this circular.
6. The Merchant Bankers are directed to: (a) Comply with the conditions specified in the circular. (b) Create awareness among issuers of such securities regarding provisions of this circular. 7. The Credit Rating Agencies are directed to comply with the conditions specified in the circular. 8. This circular shall be applicable on all offer documents on which in-principle/ final approval is sought from stock exchanges on or after November 01, 2011.
4. Applicability
5. The above listing conditions are specified in exercise of the powers conferred under Section 11 read with Section 11A of the Securities and Exchange Board of India Act, 1992. 6. This circular is available on SEBI website at www.sebi.gov.in under the categories “Legal Framework” and “Issues and Listing”.
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Sunil Kadam General Manager
(GN - 357) NOVEMBER 2011
20
Disclosure of Price Information of past issues handled by Merchant Bankers
[Issued by the Securities and Exchange Board of India, vide Circular No.CIR/CFD/DIL/5/2 011, dated 27.09.2011] 1. Schedule VI, Form A, para (16) of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 provides that ‘Price Information of Past Issues handled by Merchant Bankers (who are responsible for pricing this issue)’ should be enclosed along-with Due Diligence certificate submitted to the Board. 2. The format for disclosure of Price Information of Past Issues handled by Merchant Bankers is given at Annexure.
4. This circular shall be applicable on Draft Red Herring Prospectus/ Red Herring Prospectus/Prospectus filed with SEBI/Registrar of Companies (as applicable) on or after November 01, 2011. 5. This circular is issued in exercise of the powers conferred under Section 11 read with Section 11A of the Securities and Exchange Board of India Act, 1992 read with SEBI (ICDR) Regulations, 2009. 6. This circular is available on SEBI website at www.sebi.gov.in under the categories “Legal Framework” and “Issues and Listing”.
Sanjay Purao 3. All concerned Merchant Bankers are directed to comply Deputy General Manager with the instructions contained in this circular. FORMAT FOR DISCLOSURE OF PRICE INFORMATION OF PAST ISSUES HANDLED BY MERCHANT BANKER(s) TABLE 1 Sl. No
Issue Name
Issue Size Rs. (Cr.)
Issue price (Rs.)
Listing Opening price on date listing date
Closing price on listing date
% Change in Price on listing date (Claosing vs. Issue Price)
Benchmark index on listing date (closing)
Closing price as on 10th calendar day from listing day
Benchmark index as on 10 th calendar day from listing day (closing)
Closing price as on 20th calencar day from listing day
Benchmark index as on 20th calendar day from listing day (closing)
Closing price as on 30th calendar day from listing day
Benchmark index as on 30th calendar day from listing day (clos-ng)
Note: Disclosures to be given for three financial years (current financial year and two financial years preceeding the current financial year) subject to maximum 10 issues (initial public offerings) managed by Merchant Banker Note: Separate table for each merchant banker responsible for pricing the Issue TABLE 2: SUMMARY STATEMENT OF DISCLOSURE Financial Year
Total no. of IPOs
Total Funds Nos. of IPOs trading Raised at discount on listing (Rs. Cr.) date Over Between 50% 25-50%
Less than 25%
Nos. of IPOs trading Nos. of IPOs trading at premium on at discount as on listing date 30th calendar day from listing day Over Between 50% 25-50%
Less than 25%
Over Between 50% 25-50%
Less than 25%
Nos. of IPOs trading at premium as on 30th calendar day from listing day Over Between Less 50% 25-50% than 25%
20..-20.. 20..-20.. 20..-20..
Note: Disclosures have to be given for three financial years (current financial year and two financial years preceeding the current financial year) Note: Separate table for each merchant banker responsible for pricing the Issue.
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(GN - 358) NOVEMBER 2011
21
Contents of Application-Cum-Bidding Form and Manner of disclosure
[Issued by the Securities and Exchange Board of India, vide Circular No.CIR/CFD/DIL/4/2011, dated 27.09.2011] 1. SEBI has reviewed the structure, design, format, contents and order of information of Application-Cum-Bidding-Form to make it investor friendly and also to ensure uniformity in bidding and accuracy. 2. The form has been standardized and it has been decided that henceforth there would only be a single form for ASBA and Non-ASBA applicants. It has also been decided that the Application-Cum-Bidding Form (accompanied with abridged prospectus) would be printed in a booklet form of A4 size paper. 3. In order to ensure uniformity and to facilitate easier identification, it has been decided to standardize the colour of the Application-Cum-Bidding Form as under: White form for Resident Indian, Eligible NRIs applying on a non repatriation basis Blue form for Eligible NRIs, FVCIs, FIIs, their SubAccounts (other than Sub-Accounts which are foreign corporates or foreign individuals bidding under the QIB Portion), on a repatriation basis 4. The full text of data fields required in Application-CumBidding-Form is given in the Annexure-A hereto. A gist of major changes is given below: (a) the placement of the data fields has been done keeping in mind the ease of reference to investors/intermediaries for identification of name of the issue. (b) company specific information is now included in abridged prospectus. (c) information/instruction(s) which are required to fill the form have been placed overleaf of the Application Form. Remaining information/instruction(s) which are generic in nature have been incorporated in General Information Document. (d) the pre-printing of prefix number in the Application Form has been done away with to reduce errors caused in data entry. All forms shall henceforth carry eight digit application numbers which shall be serially numbered. Serial number may be system generated or stamped with automatic numbering machine and the forms should be date and time stamped at the bidding centers. In order to ensure correct categorization of bids, special series shall be used for employees (where employee reservation is applicable). (e) new data fields viz. discount, net price etc have been introduced to help investors to pay the correct amount
along with the Bid Application Form in issues where discount is offered. (f) signature of only the first bidder would be required. First bidder would be deemed to have signed on behalf of joint holders and would give requisite confirmation(s) to that effect. 5. Syndicate Member/SCSB to note that additional provision for stamp of broker/SCSB Branch has been made in the main application form. The stamping shall be done only after bid has been uploaded. 6. An Illustrative Format for Application-Cum-Bidding-Form is placed at Annexure-B hereto. All intermediaries to note that no changes shall be carried out in spacing, placement or in data fields in the Main Application Form and Bid Revision Application Form. 7. All concerned intermediaries are directed to comply with the instructions contained in this circular. 8. This circular shall be applicable on Red Herring Prospectus/ Prospectus filed with Registrar of Companies on or after November 01, 2011. This is to enable changes in the systems at Stock Exchange and SCSB level. 9. This circular is issued in exercise of the powers conferred under Section 11 read with Section 11A of the Securities and Exchange Board of India Act, 1992 read with SEBI (ICDR) Regulations, 2009. 10. This circular is available on SEBI website at www.sebi.gov.in under the categories “Legal Framework” and “Issues and Listing”. Sanjay Purao Deputy General Manager Annexure Manner and contents of Application-Cum-Bidding Form A. Main Application Form 1. Top of the application form shall have a Colored identifier strap incorporating the name of the issuer, ISIN number & type of form (Repatriation/Non-Repatriation Form). 2. 8 digit Application Number 3. Stamp/Serial Number/Code of Syndicate Member, Broker/ Agent/Sub-Broker/Sub- Agent, Escrow Bank/Bank Branch/ SCSB & Registrar to the issue 4. Name & Contact Details of First/Sole Applicant {Name, Address, Email (optional), Tel No/Mobile (optional)} 5. PAN of First/Sole Applicant 6. Bidders Depository Account Details - Check Box for NSDL and CDSL & single 16- digit field (consisting of DP ID and Client ID)
1627
(GN - 359) NOVEMBER 2011
7. Investor Category (Retail Individual, Non Institutional or QIB) 8. Investor Status (Separate Status for Repatriation/NonRepatriation Form). 9. Bid Options (a) Columns for Bid Options (Option 1, Option 2 or Option 3), Number of equity shares bid, Price per equity shares (sub-columns for Bid price, discount(if any) and Net price) (b) Attention of investors to be drawn to instruction that only retail individual investors can bid at Cut-off. (c) Check-Box for Cut-Off (d) Instruction that (i) Bids must be in multiple of bid lot as advertised (ii) Price in multiples of only (iii) Number of shares and price per share be given in figures only 10. Payment Options (a) Amount Paid in figures & in words (b) Box for Investor to select option (i) Cheque/ DD : number, date & drawn on (Bank Name & Branch) (ii) ASBA: Bank Account Number & Bank Name and Branch 11. A confirmation by the Applicant (on behalf of joint bidders) that he/she has read, understood and agrees to such confirmations. 12. Signature of First/Sole Applicant (with date) 13. Signature of Account holder(s) upto 3 (in case of joint accounts) for ASBA 14. Authorization for necessary action by SCSBs for making the application 15. Broker’s/ SCSB Branch’s Stamp (Acknowledging upload of Bid in Stock Exchange System 16. Acknowledgement Slip for Syndicate Member (a) 8 digit Application Number (b) Bidders Depository Account Details - Single 16-digit field (consisting of DP ID and Client ID) (c) PAN of First/Sole applicant (d) Amount Paid less discount (if any) in figures (e) Payment Details (Bank & branch, Cheque/DD/ASBA Bank Account No.) (f) Received from Name, Telephone/Mobile and Email of Bidder
(g) Stamp & Signature of Banker 17. Acknowledgement Slip for Bidder (a) Columns for Bid Options (Option 1, Option 2 or Option 3), rows for Number of equity shares bid, Bid price, Total Amount paid (b) 8 digit Application Number (c) Name of First/Sole Applicant (d) Acknowledgement of Syndicate Member/ SCSB (e) Payment Details (Bank & branch, Cheque/DD/ASBA Bank Account No.) B. Overleaf of main Application Form 1. Bidder’s Undertaking, Confirmations and additional requirements for ASBA Bidders 2. Instructions corresponding to each item of main application form and specific instruction regarding : (a) Name (Name should be given exactly as appearing in DP records) (b) Instruction regarding PAN (c) Information regarding use of demographic details (d) Terms of Present Issue viz. Minimum & Maximum bid Size, Bid lot & Price Band, Margin Amount, bidding instructions (e) Definition of Bid i.e. bid should be defined as ‘indication to make an offer’ and not as ‘an offer’. (f) Other instructions (g) Contact Details of First / Sole Applicant (h) Instructions with respect to payment/ payment instrument (i) Instructions at the back of Acknowledgement Slip for Bidder (i) Company Contact Details (ii) Registrar Contact Details (iii) Contact persons in case of queries pertaining to allotment/credit of shares, submission and upload of ASBA bids C. Bid Revision Application Form 1. Top of the application form shall have a Colored identifier strap incorporating the name of the issuer, ISIN number & type of form (Repatriation/Non-Repatriation Form). 2. 8 digit Application Number (Same as that of Main Application form) 3. Stamp/Serial Number/Code of Syndicate Member, Broker/ Agent/Sub-Broker, Escrow Bank/Bank Branch/SCSB & Registrar to the issue (as applicable)
1628
(GN - 360) NOVEMBER 2011
4. Name of First/Sole Applicant 5. PAN of First /Sole Applicant 6. Bidders Depository Account Details - Check Box for NSDL and CDSL & single 16- digit field (consisting of DP ID and Client ID) 7. Options for change of Bid (a) From (i) Columns for Bid Options (Option 1, Option 2 or Option 3), Number of equity shares bid, Price per equity shares (sub-columns for Bid price, discount, if any and Net price) (ii) Check-Box for Cut-Off (iii) Watermark in background indicating Old Bid (b) To (i) Columns for Bid Options (Option 1, Option 2 or Option 3), Number of equity shares bid, Price per equity shares (sub-columns for Bid price, discount, if any and Net price) (ii) Check-Box for Cut-Off (iii) Watermark in background indicating Revised Bid (c) Instruction that (i) Bids must be in multiple of bid lot as advertised (ii) Price in multiples of only (iii) Number of shares and price per share be given in figures only 8. Payment Options (a) Additional Amount Paid in figures & in words (b) Box for Investor to select option (i) Cheque/ DD : number, date & drawn on (Bank Name & Branch) (ii) ASBA: Bank Account Number & Bank Name and Branch 9. A confirmation by the Applicant (on behalf of joint bidders) that he/she has read, understood and agrees to such confirmations 10. Signature of First/Sole Applicant (with date) 11. Signature of ASBA Account holder(s) upto 3 (in case of joint accounts) 12. Authorization for necessary action by SCSBs for making the application 13. Broker’s/ SCSB Branch’s Stamp (Acknowledging upload of Bid in Stock Exchange System)
14. Acknowledgement Slip for Syndicate Member for Revised Bid (a) 8 digit Application Number (b) PAN of First /Sole Applicant (c) Bidders Depository Account Details - Check Box for NSDL and CDSL & single 16-digit field (consisting of DP ID and Client ID) (d) Revised Amount Paid less discount (if any) in figures (e) Payment Details (Bank & branch, Cheque/DD/ASBA Bank Account No.) (f) Received from Name, Telephone/Mobile and Email of Bidder (g) Stamp & Signature of Banker (h) Watermark in background indicating Revised Bid 15. Acknowledgement Slip for Bidder for Revised Bid (a) Columns for Bid Options (Option 1, Option 2 or Option 3), rows for Number of equity shares bid, Bid price, Revised Amount paid (b) 8 digit Application Number (c) Name of First/Sole Applicant (d) Acknowledgement of Syndicate Member/ SCSB (e) Payment Details (Bank & branch, Cheque/DD/ASBA Bank Account No.) D. Overleaf of Bid Revision Application Form 1. Bidder’s Undertaking for revised bid separately drafted for Repatriation/Non- Repatriation Form). 2. Instructions corresponding to each item of revised form and specific instruction regarding : (a) Bid Price Revision clearly specifying that only excess amount (if any) is payable (b) Attention of investors to be drawn to instruction that only retail individual investors can bid at Cut-off. 3. Issue Structure highlighting for different category of investors (Retail, Non Institutional and QIBs) (a) Number of equity shares (reservation if applicable) (b) Percentage of Issue available for allotment/allocation (c) Basis of allocation in case of oversubscription (d) Mode of allotment (e) Allotment lot (f) Who can apply (Summary) (g) Terms of payment ANNEXURE B* *Not reproduced here for Annexure B log on to sebi.gov.in and then refer to the Circular.
1629
(GN - 361) NOVEMBER 2011
1630
NOVEMBER 2011
Institute News Press Conference at Agra On 12.10.2011 as a curtain raiser to the 39th National Convention of Company Secretaries, a Press Conference was held at Jaypee Palace Hotel and Convention Centre, Agra. The Press Meet was addressed by CS Anil Murarka, President, ICSI. Shri Nesar Ahmad, Vice President, Shri Harish K Vaid, Council Member & Chairman, Convention Organising SubCommittee, Shri N K Jain, Secretary & CEO, Shri Ranjeet Pandey, Chairman, NIRC of the ICSI and Smt. Anju Jain Chairman, Agra Chapter of the ICSI also graced the Press Meet. In addition to highlighting the theme of the National Convention, various initiatives taken by the Institute including Role of Company Secretaries in the coming years, Specialised B.Com. & M.Com. courses for CS Students: MOU with IGNOU, Post Membership Qualification (PMQ) Course in Corporate Insolvency & Restructuring, and Competition Law, Secretarial Standards released by the Institute, Plans in terms of Foreign Collaboration were deliberated upon. Nearly, fifty media persons from the National and the Regional Print and Electronic Media attended the Press Conference which was extensively covered in several editions of leading newspapers with coloured photographs in Agra and across India. The event was telecast on DD (National), Sahara Samay, IBN 7, Aaj Tak, Star News, A to Z News, Zee –UP, Digi News, Sea News, Moon TV, CNBC (Awaaz), AAJ Tak, NDTV, ANI, India News, Zee News, ETV News. The major newspapers that provided massive mileage to the Institute included Business Standard, Financial Express, The Times of India, The Hindustan Times, The Asian Age, Indian Express, The Pioneer, Free Press Journal, New Indian Express, State Times Dainik Jagran, Business Standard (Hindi), Rashtriya Sahara, Business Bhaskar, Amar Ujala, Navbharat Times, DLA News, Kalpatru Express, Aaj, Raj Express, Jansatta, I Next, HT City and Internet editions of Newspapers, Coverage on several Educational/Business Websites etc. Reports on the Inaugural, Special and Valedictory Sessions of the National Convention were also published in major dailies and covered by leading TV Channels from 13.10.2011 to 15.10.2011 at Agra.
MEMBERS ADMITTED/RESTORED Sl. No.
Name
Membership Region No.
FELLOWS*
1.
Mr. Pankaj Kumar Namdharani
FCS-6609
WIRC
2.
Ms Rajkumar Kanagavalli
FCS-6610
SIRC
3.
Mr. Krishna Murthy V C
FCS-6611
SIRC
4.
Mr. S B Singh
FCS-6612
NIRC
5.
Mr. Sanjay Pandurang Parab
FCS-6613
WIRC
6.
Mr. Manjul Grover
FCS-6614
NIRC
7.
Mr. Amit Manchanda
FCS-6615
NIRC
8.
Mr. John Joseph
FCS-6616
SIRC
9.
Mr. Amod Kumar Jha
FCS-6617
NIRC
10. Mr. Vikas Kumar Tak
FCS-6618
NIRC
11. Mr. M. Vasanthakuari
FCS-6619
SIRC
12. Mr. Suraj Aggarwal
FCS-6620
NIRC
13. Mr. Kumar Randhir Singh
FCS-6621
NIRC
Sl. No.
Name
Membership Region No.
ASSOCIATES*
1. 2. 3. 4. 5. 6. 7. 8. 9.
Ms. Sweena Khanuja Mr. Biresh Kumar Das Ms. Vedvati Deepak Bhangaonkar Ms. Anushree Bhargava Ms. Ankita Arora Ms. Priyanka Saxena Mr. Virendra Singh Mertiya Mr. Satyajit Prasad Ms. Sangita Bajaj
ACS-28724 WIRC ACS-28725 NIRC ACS-28726 WIRC ACS-28727 ACS-28728 ACS-28729 ACS-28730 ACS-28731 ACS-28732
NIRC NIRC NIRC SIRC EIRC EIRC
*Admitted on 20th September, 30th September, and 10th October, 2011.
1631
NOVEMBER 2011
10.
Ms. Rupinder Kaur
ACS-28733 NIRC
48.
Ms. Princy Agrahri
ACS-28771 NIRC
11.
Ms. Sneha Mahesh Shah
ACS-28734 WIRC
49.
Mr. Raktim Sarkar
ACS-28772 NIRC
12.
Ms. Sneha Manoj Shah
ACS-28735 WIRC
50.
Mrs. Amisha Ritesh Jain
ACS-28773 WIRC
13.
Sh. Siddharth Sancheti
ACS-28736 EIRC
51.
Ms. Nidhi Jain
ACS-28774 WIRC
14.
Ms. Renuka Jindal
ACS-28737 NIRC
52.
Mr. Kumar Ankit
ACS-28775 SIRC
15.
Ms. Seema Manglunia
ACS-28738 EIRC
53.
Mr. Chirag Arvind Vora
ACS-28776 WIRC
16.
Ms. Rakhi Dasgupta
ACS-28739 EIRC
54.
Ms. Meenu Jain
ACS-28777 NIRC
17.
Mr. Kailash Chunnilal Purohit ACS-28740 WIRC
55.
Ms. Annam Chidambaram
ACS-28778 SIRC
18.
Ms. Divyata Dilip Raval
ACS-28741 WIRC
56.
Mr. Amit Maheshwari
ACS-28779 NIRC
19.
Ms. Srividya D
ACS-28742 SIRC
57.
Ms. Shubhanjali Tewari
ACS-28780 NIRC
20.
Ms. Tulsi Sharma
ACS-28743 NIRC
58.
Ms. Kunal Ramji Chheda
ACS-28781 WIRC
21.
Mr. Swanand Ravindra Shintre ACS-28744 WIRC
59.
Mr. Suresh M V
ACS-28782 SIRC
22.
Ms. Vijaya Agrawal
ACS-28745 WIRC
60.
Mr. Amit Aggarwal
ACS-28783 NIRC
23.
Ms. Shilpi Jain
ACS-28746 NIRC
61.
Ms. Prachi Jain
ACS-28784 NIRC
24.
Ms. Sakina Dickenwala
ACS-28747 WIRC
62.
Mr. Ronak Deepak Babaria
ACS-28785 WIRC
25.
Ms. Jananee B
ACS-28748 SIRC
63.
Ms. Dipti Vilas Ghodekar
ACS-28786 WIRC
26.
Mr. Adnan Abdullah Ginwala ACS-28749 WIRC
64.
Mr. Amit Dave
ACS-28787 NIRC
27.
Mr.Srirang Mahabhagwat
ACS-28750 NIRC
65.
Mr. Hitesh Kumar Pareek
ACS-28788 NIRC
28.
Mr.Deepak Tibrewal
ACS-28751 SIRC
66.
Mr. Pankaj Chandak
ACS-28789 EIRC
29.
Mr. Vishal Daga
ACS-28752 WIRC
67.
Ms. Kanchan Anirudha Limaye ACS-28790 WIRC
30.
Ms. Aditi Ravindra Nayak
ACS-28753 WIRC
68.
Mr. Rajiv Kumar Agrawal
ACS-28791 NIRC
31.
Ms. Pallavi Prabhu Chodnekar ACS-28754 WIRC
69.
Mr. Vinay Mohta
ACS-28792 SIRC
32.
Ms. Bhairavi Katre
ACS-28755 WIRC
70.
Ms. Radhika Kumar Asher
ACS-28793 WIRC
33.
Ms. Rajni Rajpoot
ACS-28756 NIRC
71.
Ms. Mamta Gupta
ACS-28794 NIRC
34.
Ms. Kajal Rajnikant Desai
ACS-28757 WIRC
72.
Mr. Rajeev Kumar Nayak
ACS-28795 NIRC
35.
Mr. Jiyut Prasad
ACS-28758 EIRC
73.
Ms. Shephali Kapoor
ACS-28796 NIRC
36.
Ms. Renu Dilip Wadekar
ACS-28759 WIRC
74.
Ms. Jenita Sharma
ACS-28797 EIRC
37.
Ms. Hema Lalwani
ACS-28760 NIRC
75.
Ms. Pooja Khurana
ACS-28798 NIRC
38.
Ms. Deepali Kaushik
ACS-28761 NIRC
76.
Ms. Priyanka Narayan
ACS-28799 WIRC
39.
Mr. Arun Kumar Singh
ACS-28762 NIRC
77.
Ms. Ami Himanshu Sanghavi
ACS-28800 WIRC
40.
Ms. Snehal Ramesh Kulkarni
ACS-28763 WIRC
78.
Mr. Himanshu Tyagi
ACS-28801 NIRC
41.
Ms. Krupa Harshad Savani
ACS-28764 WIRC
79.
Ms. Tanu Berry
ACS-28802 NIRC
42.
Ms. Khushboo Agarwal
ACS-28765 EIRC
80.
Ms. Bharti Hastimal Jain
ACS-28803 WIRC
43.
Ms. Shilpa Chakraborty
ACS-28766 EIRC
81.
Mr. Amit Kumar
ACS-28804 NIRC
44.
Mr. Harshal Arun Nasikkar
ACS-28767 WIRC
82.
Ms. Delzeen M Patel
ACS-28805 WIRC
45.
Ms. Rashmi Kumari
ACS-28768 NIRC
83.
Mr. Ramesh L Koduri
ACS-28806 WIRC
46.
Ms. Sneha Jagdish Hotchandani ACS-28769 WIRC
84.
Mr. Vinod Sharma
ACS-28807 NIRC
47.
Mr. Oovesh Mohd Rafique Sara
85.
Ms. Bhumi Bhavinbhai Desai
ACS-28808 WIRC
86.
Mr. Nitin Rawat
ACS-28809 NIRC
ACS-28770 WIRC
1632
NOVEMBER 2011
87.
Mr. Nishant Singla
ACS-28810 NIRC
122. Mr. Tanmoy Banerjee
88.
Ms. Sharmila Moreshwar Kulkarni
ACS-28811 WIRC
123. Mr. Satyendra Shirish Kakade ACS-28846 WIRC 124. Ms. Bhawna Sharma
ACS-28847 WIRC
89.
Mr. Swastik Roy
ACS-28812 EIRC
125. Ms. Deepika Devendra Sabni
ACS-28848 WIRC
90.
Ms. Vartika Agarwal
ACS-28813 NIRC
126. Ms. Meghana Sharad Paranjpe ACS-28849 WIRC
91.
Mr.Meet Jayantilal Joshi
ACS-28814 WIRC
127. Mr. Rahul Misra
ACS-28850 NIRC
92.
Mr. Subhajit Das
ACS-28815 EIRC
128. Mr. Sumit Garg
ACS-28851 NIRC
93.
Mr. Asheesh Kumar Goyal
ACS-28816 NIRC
129. Mr. Babu R
ACS-28852 SIRC
94.
Ms. Shalini B
ACS-28817 SIRC
130. Mr. Rabindra Kumar Swain
ACS-28853 SIRC
95.
Ms. S Chella
ACS-28818 SIRC
131. Ms. Jasleen Kaur
ACS-28854 NIRC
96.
Ms. Komal Khattar
ACS-28819 NIRC
132. Mr. Dhawal Chhaganlal Gadda ACS-28855 WIRC
97.
Ms. Harpreet Kaur
ACS-28820 NIRC
133. Ms. Asha Singh
ACS-28856 NIRC
98.
Mr. Gaurav Kaushik
ACS-28821 NIRC
134. Mr. P Pedavenkata Reddy
ACS-28857 SIRC
99.
Ms. Akshatha Rajmohan Shetty ACS-28822 WIRC
ACS-28845 EIRC
135. Mr. Manish Jain
ACS-28858 NIRC
100. Mr.Abhishek Upadhyaya
ACS-28823 EIRC
136. Ms. Suma Pradip Biswas
ACS-28859 WIRC
101. Mr. Savan Pravinbhai Moradiya
ACS-28824 WIRC
137. Mr. Hrishikesh Ravindra Kale ACS-28860 WIRC
102. Ms. Sampada Ramesh Landage ACS-28825 WIRC 103. Mr. Kalpesh Harilal Solanki
ACS-28826 WIRC
104. Ms. Neha Goel
ACS-28827 NIRC
105. Ms. Priyanka Saxena
ACS-28828 NIRC
106. Ms. Ashwini Arun Deodhar
ACS-28829 WIRC
107. Ms. Juhi Pandey
ACS-28830 NIRC
108. Ms. Jinal Ajit Desai
ACS-28831 WIRC
109. Ms. Gouri Parshotamdas Kheskwani
ACS-28832 WIRC
110. Mr. Vineet Malhotra
138. Ms. Rohini Jaiprakash Haridas ACS-28861 WIRC 139. Ms. Yoginee Suhas Chaukar
ACS-28862 WIRC
140. Mr. Mehulkumar Kantilal Vyas ACS-28863 WIRC 141. Ms. Madhu Bala Sharma
ACS-28864 NIRC
142. Ms. Ruchitra Joshi
ACS-28865 NIRC
143. Ms. Apurva Arun Kulkarni
ACS-28866 WIRC
144. Mr. Shubham Aggarwal
ACS-28867 NIRC
145. Mr. Chandra Kishor Jha
ACS-28868 NIRC
146. Ms. Sapna Jain
ACS-28869 NIRC
ACS-28833 NIRC
147. Ms. Sashi Bhatter
ACS-28870 NIRC
111. Ms. Ankita Anil Gawankar
ACS-28834 WIRC
148. Ms. Ruhi Bhasin
ACS-28871 NIRC
112. Ms. Radhika Rathi
ACS-28835 NIRC
149. Ms. Aditi Ashok Jain
ACS-28872 WIRC
113. Ms. Aditi Harnamsingh Thakur ACS-28836 WIRC
150. Ms. Richa Arya
ACS-28873 NIRC
114. Mr. Jitin Asudani
ACS-28837 NIRC
151. Ms. Nisha Choudhury
ACS-28874 NIRC
115. Mr. Sanjeev Kumar
ACS-28838 NIRC
152. Ms. Sarita Lalwani
ACS-28875 NIRC
116. Ms. Rashmi Khandelwal
ACS-28839 NIRC
153. Mr. Anuj Nigam
ACS-28876 NIRC
117. Mr. Harish D
ACS-28840 SIRC
154. Ms. Priyanka Singh
ACS-28877 EIRC
118. Mr. Vivek Vats
ACS-28841 NIRC
155. Ms. Aditi Agarwal
ACS-28878 NIRC
119. Mr. Venkataramanan Srinivasan
ACS-28842 SIRC
156. Ms. Sanchaita Saha
ACS-28879 EIRC
157. Mr. Ketan Sethi
ACS-28880 NIRC
120. Mr. Nava Jyoth Puttaparthi
ACS-28843 SIRC
158. Ms. Ankita Jitendra Kamani
ACS-28881 WIRC
121. Ms. Manju Laur
ACS-28844 WIRC
159. Mr. Ashoka Gogate
ACS-28882 SIRC
1633
NOVEMBER 2011
160. Ms. Ruchi Bajaj
ACS-28883 NIRC
6.
Ms. Vandana Goel
ACS-20970 NIRC 10318
161. Mr. K Vijaykumar
ACS-28884 NIRC
7.
Mr. Anil Agarwal
ACS-27550 SIRC 10319
162. 163. 164. 165.
ACS-28885 ACS-28886 ACS-28887 ACS-28888
8.
Mr. Moneesh Gupta
ACS-28514 NIRC 10321
9.
Ms. Rajni Nagi
ACS-28671 NIRC 10322
Sl. No.
Mr. Kushagra Rastogi Ms. Nisha Mandeep Khyalia Mr. Kishor Chauhan Ms. Pratima Vashyal Name
NIRC WIRC NIRC NIRC
Membership Region No.
RESTORED*
10. Ms. Babban Deep Kaur
ACS-27767 NIRC 10323
11. Ms. Shweta Agarwal
ACS-24594 NIRC 10324
12. Mr.Hridesh Agarwal
ACS-17367 NIRC 10325
13. Ms. Nidhi Adhikari
ACS-28099 NIRC 10326
14. Mr. Gopabandhu Mishra
ACS-28383 NIRC 10327
1.
Mukesh Kumar
ACS-20411 NIRC
15. Ms. Himadri
ACS-26577 NIRC 10328
2.
Vinayak Narayan Bapat
ACS-19910 WIRC
16. Ms. Priyanka Vij
ACS-28384 NIRC 10329
3.
Ms. Mridul Sharma
ACS-16270 NIRC
17. Ms. Sapna Goel
ACS-28453 NIRC 10330
4.
K R Chandrasekhara Kurup
ACS-6435
18. Mr. Nagendra Bhagwat
ACS-28324 SIRC 10331
5.
A Kamal Kishore
ACS-17430 NIRC
19. Ms. Karishma Singh
ACS-26054 NIRC 10332
6.
Ms. Sandeep Kaur
ACS-15960 NIRC
20. Mr.Dheeraj Sharma
ACS-21999 WIRC 10333
7.
Subhash Vithal Satam
8.
D Murali
9.
Govind M Joshi
10.
Fcs-1404
NIRC
WIRC
21. Mr.Janak Bharatbahi Patel ACS-24221 WIRC 10334
ACS-21215 SIRC
22. Ms. Girija Nagvekar
ACS-28111 WIRC 10335 ACS-20406 EIRC 10336
Fcs-3241
SIRC
23. Ms Khushboo Agarwal
V Kothandaraman
ACS-9715
WIRC
11.
Anil Jain
ACS-3017
NIRC
24. Ms. Yugandhara Prakash ACS-28673 WIRC 10337 Kothalkar
12.
Ms. Sushama Chetwani
ACS-23411 WIRC
25. Ms. Nancy Bhandari
13.
Ashok K Kumat
ACS-7077
26. Mr.Pradeep Kumar Sahoo Fcs-6234
14.
Ms. Shaista Ismail Shaikh
ACS-15568 WIRC
27. Ms. Rekha Anil Gupta
ACS-24804 NIRC 10340
15.
Utpal Mahendra Shah
ACS-14645 WIRC
ACS-26960 WIRC 10341
16.
Ramesh Nagjibhai Thakkar
ACS-4313
28. Ms. Snehal Prashant Thoke
17.
Sunil Kumar Jhunjhunwala
ACS-14886 EIRC
CERTIFICATE CANCELLED
OF
Sl. Name No.
PRACTICE CP No.
WIRC
WIRC
ACS-28486 NIRC 10338
29. Mr.P V Anantha Bhaskar Fcs-3505
ISSUED/
ACS/FCS Region
ISSUED**
NIRC 10339
SIRC 10342
30. Ms. Shikha Fathepuria
ACS-28545 EIRC 10343
31. Mr. Ashutosh Avinash Muglikar
ACS-28699 WIRC 10344
32. Ms. Rucha Milind Patwardhan
ACS-27266 WIRC 10345
33. Mr. Prasanna Subbarao
ACS-19834 SIRC 10346
34. Ms. Aru Singhal
ACS-27789 NIRC 10347
35. Mr.V Viswanathan
ACS-2101
1.
Ms. Sakshi Jain
ACS-28016 NIRC 10313
2.
Mr.Vinay Gupta
ACS-11682 WIRC 10314
3.
Ms. Neha Bablani
ACS-28210 NIRC 10315
36. Mr.Dhiraj Balasaheb Dhamane
ACS-21172 WIRC 10349
4.
Ms. Megha Arora
ACS-28441 NIRC 10316
37. Ms. Richa Sharma
ACS-21800 WIRC 10350
5.
Ms. Sheffali Grover
ACS-26218 SIRC 10317
38. Ms. Prathyusha A
ACS-27918 SIRC 10351
39. Mrs. Seema Agarwal
ACS-25706 EIRC 10352
*Members restored from 20/09/2011 to 19/10/2011. **During the Month of September, 2011.
1634
SIRC 10348
NOVEMBER 2011
40. Mr.Vijay Kumar Verma
FCS-1430
NIRC 10353
3.
Noorul Hassan Shaik
8076
ACS-17995
41. Mr.Abhay Kumar Sharma ACS-20939 NIRC 10354
4.
Brajmohan Singh
9629
ACS-26411 NIRC
42. Ms. Jyoti Kukreja
ACS-21032 NIRC 10355
5.
Ms. Shivani Banerjee
8288
ACS-16522 NIRC
43. Mr. Satish Sharma
ACS-28706 WIRC 10356
6.
Vikas Chandra
10117 ACS-27296 WIRC
44. Mr. Abhijit Avinash JagtapACS-27888 WIRC 10357
7.
Prabhat Kumar Agarwal 6988
45. Ms. Akshada Kaslay
ACS-23278 WIRC 10358
8.
Ms. Vineeta Shriwani
9915
46. Mr. Alok
ACS-28342 SIRC 10359
9.
P K Ramasubramanian
4454
47. Ms. Payal Agarwal
ACS-23988 EIRC 10360
10. Ms. Jyoti Singh
8162
ACS-18215 NIRC
48. Mr. Viral Deepak Bhai Ranpura
ACS-28496 WIRC 10361
11. Ms. Ishita Khanna
8502
ACS-23558 NIRC
12. Ms. Shweta Khanna
8503
ACS-23525 NIRC
49. Mr.Suresh Kundnani
ACS-26641 WIRC 10362
13. Ms. Swati Sharma
9276
ACS-25970 NIRC
50. Ms. Sujata Tyagi
ACS-27681 NIRC 10363
14. Mrs. Preeti Kaur Bansal
9233
ACS-25894 NIRC
51. Ms. Sakina Dickenwala
ACS-28747 WIRC 10364
15. R Sivasubramanian
9525
52. Ms. Salma Shami S
ACS-28707 SIRC 10365
16. Kuldeep Singh
7551
53. Ms. Ritu Sonkhiya
ACS-24549 NIRC 10366
17. V Viswanathan
8960
54. Ms. Jyoti Mehta
ACS-23430 WIRC 10367
18. Ms. Nikita Madan
10157 ACS-25370 NIRC
55. Ms. Rajalakshmi M
ACS-27784 SIRC 10368
19. Vikram Somani
10039 ACS-25514 NIRC
56. Mr. Amardeep Singh Duggal
ACS-28559 WIRC 10369
20. Shubham Arora
10202 ACS-27263 NIRC
57. Mr. Nikhil Rajkumar Gupta
ACS-28572 WIRC 10370
21. K K Rao
5616
22. Vishal Sharma
7930
58. Ms. Nidhi Hitesh Vaswani ACS-28480 WIRC 10371
23. Akash Gupta
10102 ACS-23248 NIRC
59. Mr.Shrinivas M Devadiga
ACS-22381 SIRC 10372
24. Akshit Gupta
10232 ACS-22963 NIRC
25. Ms. Preeti Jindal
10269 ACS-27258 NIRC
60. Ms. Rakhi Shrinivas Joshi
ACS-27030 WIRC 10373
61. Mr.Triloki Nath Verma
ACS-21809 NIRC 10374
62. Mr.Milind Subhash Jog
ACS-15403 WIRC 10375
63. Mr.Surinder Kumar Jolly
FCS-2373
64. Ms. Rashmi Agarwal
ACS-23064 EIRC 10377
LICENTIATE ICSI ADMITTED*
65. Ms. Ruchita Jain
ACS-24203 EIRC 10378
66. Ms. Jinu Jain
ACS-22076 NIRC 10379
Sl. Name No. CANCELLED*
CP No.
Sl. No. 1.
Ms. S Krithika
CP LicenciateNo. 6267 South
2.
Ankit Jain
6268
North
3.
Dhirav Ramesh Shah
6269
South
1.
B Prabakar
10143 ACS-13914
4.
Sandip Vishnu Patil
6270
West
2.
Mrs. Harshi Khatri
8535
5.
Karthik V
6271
South
*During the Month of September, 2011.
NIRC 10376
ACS/FCS Region
SIRC
ACS-15185 NIRC
SIRC
Fcs-6431 NIRC ACS-21814 WIRC ACS-2184
Fcs-3869
SIRC
SIRC
ACS-12929 NIRC ACS-7078
Fcs-5719
SIRC
SIRC
ACS-19853 NIRC
26. Sandip Ravindra Pradhan 9778
ACS-17169 WIRC
27. Ms. Poonam Chauhan
9471
ACS-22398 NIRC
28. Sachin Bhardwaj
8803
ACS-23232 NIRC
29. Raman Kumar
10312 ACS-14972 NIRC
30. Ms. Lata Saini
10050 ACS-23068 NIRC
Name
*During the period 12.09.2011 to 30.09.2011.
1635
NOVEMBER 2011
6.
Pratik Tejawat
6272
East
7.
Snehansu Dutta
6273
East
8.
Hiten Keshavji Dedhia
6274
West
9.
Preet Deep Singh
6275
North
10.
Kelam Subrahmanyam
6276
South
LIST OF COMPANIES REGISTERED FOR IMPARTING TRAINING DURING THE MONTH OF SEPTEMBER, 2011 Region
Training period
Stipend Rs.
EASTERN Enfield Solar Energy Ltd. 15 Months A/1A, Jagmohan Mullick Lane Training Kolkata-700 007 info@sonthaliagroup.com
Suitable
LSI Financial Services (P.) Ltd. 15 Months Sagar Trade Cube, 5th Floor Training 104, S. P. Mukherjee Road Kolkata-700 026 sheetal@lsimails.com
Suitable
Propello Innovations (P.) Ltd. 6, Sarat Chatterjee Road Kolkata-700 089
15 Months Training
Suitable
Himadri Chemicals & Industries 03 Months Ltd.. 23 A, Netaji Subhas Practical Road, 8th Floor Training Kolkata-700 001
Suitable
McNally Sayaji Engineering Ltd. 15 and 03 Ecospace, Campus 2B, 11F/12 Months (Old Plot No. AA II/Block 3) Training New Town, Rajarhat Kolkata-700 156 amit.pathak@mbecl.co.in
5000/-
Emami Frank Ross Ltd. 7, Jawaharlal Nehru Road Kolkata-700 013 frmspl@cal2.vsnl.net.in
15 and 03 Months Training
Suitable
Pawan Castings (Meghalaya) 15 Months (P.) Ltd., Harlibagan Training Byrnihat-793 101 (Meghalaya) mcapl@sify.com
Suitable
Protech Realtors (P.) Ltd. 3rd Floor, Room No. 306
Suitable
15 and 03 Months
Dainik Purboday Bhawan (Opp. International Hospital), Chritian Basti G.S. RoadsGuwahati-781 005
Training
UIC Udyog Ltd. ‘ANANDLOK”, Block-A 1st Floor 227, A.J.C. Bose Road, Kolkata-700 020 sales@uicwires.com
15 and 03 Months Training
Suitable
EMTA Coal Ltd. 5B, Nandalal Basu Sarani Kolkata-700 071 emtagroup@emta.in
15 and 03 Months Training
Suitable
Ultima Finvest Ltd. 6, Jain Bhawan, 12 Bhagat Singh Marg New Delhi-110 001 ultimafinvest@yahoo.co.in
15 and 03 Months Training
Suitable
Great Eastern Energy Corporation Ltd., A 14th Floor South City, NH-8 Gurgaon 122 001
15 Months Training
3500/-
Cosmas Pharmacls Ltd. B-1/1446/10-B, Y Block Crossing, Hambran Road Ludhiana-141 001 cosmas1@gmail.com
15 Months Training
Suitable
NORTHERN
Calorx (India) Ltd. 15 Months B-7/122-A, Safdarjung Enclave Training New Delhi-110 029 calorx@airtelmail.in
3500/-
Delta Leasing And Finance Ltd. 15 and 03 104, Mukund House Months Commercial Complex, Azadpur Training Delhi-110 033 cskaursimran@gmail.com
5000/-
Pawansut Holdings Ltd. 15 and 03 104, Mukund House Months Commercial Complex, Azadpur Training Delhi-110 033 cspoonam25@gmail.com
5000/-
Sturdy Industries Ltd. 28, Ashoka Chambers Ousa Road, New Delhi chemiplast@yahoo.com 1636
15 and 03 Months Training
Suitable
NOVEMBER 2011
Sun Life India Service Centre Pvt. Ltd., Uni-Tech World Cyber Park, Tower A Ground Floor, Sector-39 Gurgaon-122 001
15 and 03 Months Training
Suitable
TD Power Systems Ltd. # 27, 28 & 29, KIADB Industrial Area, Dabaspet Nelamangala Taluk Bangalore- 562 111
15 Months Training
Telecare Network (India) Private Limited, 317, Competent House F-14, Cannought Place New Delhi-110 001
15 Months Training
Suitable
Manjushree Technopack Ltd. 143, C-5, Bommasandra Induatrial Area, Hosur Road Bangalore- 560 099 manjushree@vsnl.com
15 and 03 Months Training
Lava International Limited A-56, Sector 64 Noida-201 301
15 Months Training
Suitable
15 and 03 Months Training
Investors Clinic Infratech Private Limited, N-5, Opp. Axis Bank Sector-18 Noida-201 301 support@investorsclinic.in
15 and 03 Suitable Months Training
Doha Brokerage & Financial Services Ltd., Old No. 2 A New No. 5, West Road CIT Nagar (West) Chennai-600 035
SOUTHERN Value and Budget Housing 15 and 03 rd Corporation Ltd., 29/4, 3 Floor Months H M Strafford, 7th Cross Training Vasanthnagar Extension Off Millers Road Bangalore-560 052 srinivas.thatikonda@vhbc.com
Suitable
Bangalore International 15 and 03 Airport Ltd., Alpha 2 Months Bengaluru International Airport Training Devanhalli, Bangalore-560 300
7000/-
Malabar Ornaments (P.) Ltd. Secretarial Deaprtment Malabar Group of Companies #41/2299, 03rd Floor Malabar Gate, Puthiyara Post Ram Mohan Road Calicut-673004 corporateaffairs@ malabargroup.com
15 Months Training
Karvy Computershare (P.) Ltd. 15 Months 46, Avenue, 4 Street No. 1 Training Banjara Hills Hyderabad-500034 mailmanager@karvy.com
Indegene Lifesystems (P.) Ltd. 15 Months 4th Floor, Pine Valley Training Embassy Golf Links Business Park, Off Intermediate Ring Road, Bengaluru-560 071 info@indegene.com
Suitable
4000-6000/-
Suitable
6000/-
WESTERN
Suitable
7500/-
Rohan Dyes & Intermediates Ltd. 15 Months UG/11-12, Suryarath Complex Training Opp. White House Bldg. Nr. Panchvati Circle Ahmedabad-380 006 info@rohandyes.com
Suitable
Hi-Rel Electronics (P.) Ltd. 15 and 03 B-52, 5th Floor, Corporate House Months Nr. Judges Bunglow Training Bodakdev, Ahmedabad-380 054
Suitable
BDO Consulting (P.) Ltd. 701, Leela Business Park Andheri Kurla Road Andheri(E), Mumbai-400 059
15 Months Training
Suitable
Trend Electronics Ltd. 15 Months Fort House, 221 Dr. D.N. Road Training Fort, Mumbai-400 001
Suitable
Bajrang Agro Industries (P.) Ltd. 15 Months 1st Floor, Vikram Tower Training Sapana Sangeeta Road Indore -452 001 bajrang@airtelmail.in
Suitable
1637
NOVEMBER 2011
Mylan Pharmaceuticals (P.) Ltd. 15 Months One India Bulls Centre Training Tower 2 B, 7th Floor 841, senapati Bapat Marg Elphinstone Road (West) Mumbai-400 013
Suitable
Bhagyodaya Infrastructure Development Ltd., Gr. Floor, Harsiddhi Chambers, 74 N. M. Joshi Marg, Opp. Western Railway Health Unit, Lower Parel (W) Mumbai-400 013
15 and 03 Months Training
Suitable
Essar Power Ltd. Essar House, 11, K. K. Marg Mahalaxmi, Mumbai-400 034 powersec@essar.com
15 and 03 Months Training
Alkyl Amines Chemicals Ltd. A, Kakad Chambers, 132 Dr. Annie Besant Road Worli, Mumbai-400 018 alkyl@alkylamines.com
15 and 03 Months Training
Duflon Industries (P.) Ltd. 3, Neeldhara, Shradhanand Road Extn., Vile Parle (E) Mumbai-400 057 suhas@duflon.com
15 Months Training
Tasty Bite Eatables Ltd. 204, Mayfair Towers Wakdewadi Shivajinagar Pune-411 005
15 and 03 Months Training
3500/-
Loop Mobiles (India) Ltd. 127, Manmala Tank Road Tailalwadi, Mahim (West) Mumbai-400 016
15 and 03 Months Training
Suitable
Astral Poly Technik Ltd. 207/1, Astral House, B/h Rajpath Club, Off. S.G. Highway Ahmedabad-380 059 info@astralcpvc.com
15 Months Training
3500/-
Finolex Plasson Industries (P.) Ltd., 4th Floor, P-14 Rajiv Gandhi Infotech Park Phase-I, MIDC, Hinjewadi Pune-411 057 finolexplasson@fpil.in
15 Months Training
LIST OF PRACTISING MEMBERS REGISTERED FOR THE PURPOSE OF IMPARTING TRAINING DURING THE MONTH OF SEPTEMBER, 2011 MR./MS. RAJ KUMAR YADAV Company Secretary In Practice 10/52, Ground Floor, Old Rajinder Nagar New Delhi – 110 060
PCSA –2697
VALAND HEMANT KANCHANBHAI Company Secretary In Practice T-7, Adhayapak Kutir, Pratap Gunj Vadodara – 390 002
PCSA –2698
PCSA –2699
Suitable
RICHA SHARMA Company Secretary In Practice B-4, A-158, Dwarka Shish Building Shakarpur, Delhi – 110 092
PCSA –2700
Suitable
GOPAL PRASAD KEDIA Company Secretary In Practice No. 324/325, 1st Floor, Prabhat Complex 8, K.G. Road, Bangalore – 560 009
PCSA- 2701
Suitable
ADWAIT SANJAY WALUNJKAR Company Secretary In Practice 1st Floor, 797, Sadashiv Peth Pate Classic, Barrister Gadgil Street Pune – 411 030 VIVEK NAYAK Company Secretary In Practice F-5,/159 Zone-II., M. P. Nagar Bhopal – 462 023
PCSA-2702
DHARAMVEER SINGH Company Secretary In Practice E-136, West Patel Nagar New Delhi – 110 008
PCSA –2703
RAJNISH CHAHAL Company Secretary In Practice II RM – 128, Sector – 2, Block – 2 Rajender Nagar, Sahibabad Ghaziabad – 201 005
PCSA –2704
ANITA LAHOTI Company Secretary In Practice 4, Fairlie Place, Hmp House, 1st Floor Room No. 110, Kolkata – 700 001
PCSA –2705
SHWETA JAIN Company Secretary In Practice 301, Sidha Point, 3rd Floor, Opp. Marwari General Hospital, S.I. Road, Athgaon Guwahati -781 001
PCSA –2706
Suitable
1638
NOVEMBER 2011
A. RAGHAVAN PCSA –2707 Company Secretary In Practice 232, 7th Cross Extn., Heritage Jayendra Nagar Sembakkam, Chennai – 600 073
NISHA JAIN Company Secretary In Practice 34, Amar Nagar, Pal Road, Opp. National Handloom, Jodhpur – 342 001
PCSA –2718
V. SHANKAR Company Secretary In Practice Flat 101, Sai Krishna Enclave, 6-1-132/99 Shandagiri, Padmarao Nagar Seunderabad – 500 061
PCSA –2708
RAKESH GHORAWAT Company Secretary In Practice 89/115/3 D.N. Banerjee Road Ist Floor, Bangur Park, Rishra Hooghly – 712 248
PCSA –2719
SONALI PAROLIA Company Secretary In Practice 53, Burtolla Street, C/O Aprolia Pharmacy Kolkata -700 007
PCSA –2709
SOWMYA MACHIMADA SOMAIAH Company Secretary In Practice # 494, 8th Main, West Wing, Amar Jyoti Layout, Domlur, Bangalore – 560 071
PCSA –2720
ALPANA SETHIA Company Secretary In Practice 214, Central Avenue, Kolkata – 700 020
PCSA –2710
PCSA –2721
K. BINDU Company Secretary In Practice Panchsheel 3a/101, Raheja Township Rani Sati Marg, Malad(E) Mumbai - 400 097
PCSA –2711
R. ALAGAR Company Secretary In Practice 11/2, Venkat Apartment, Gandhi Street T. Nagar, Chennai – 600 017 SOHAN R. BAGGMAR Company Secretary In Practice No. 192/40, Vellala Street, Puraiawakkam Chennai – 600 084
PCSA –2722
ASHOK PANIGRAHI Company Secretary In Practice 1449/5b, Street No.-7 (Nr. Laxmi Diary) Durga Puri, Shahdara, New Delhi – 110 092
PCSA –2712
PCSA –2723
SURESHAN KAKKADAN Company Secretary In Practice B-18, Alpha Chambers, South Bazar Kannur– 670 002 Kerala
PCSA –2713
AKASH JAIN Company Secretary In Practice 22/63/3, Paliwal Park Crossing Old Vijay Nagar Colony Agra – 282 004 RAJEEV SUNARIA Company Secretary In Practice 187, Sector – 10, Gurgaon – 122 001
PCSA –2724
PREMLATA SONI Company Secretary In Practice 55, Ezra Street, 2nd Floor, R. No.- 4 Kolkata – 700 001
PCSA –2714
VIJAY KUMAR BHASIN Company Secretary In Practice AG -102, Shalimar Bagh Delhi – 110 088
PCSA –2725
KESHAV DATT PANDEY Company Secretary In Practice A-41 (T), Hec Colony, P.O. Dhurwa Ranchi – 834 004
PCSA –2715
REENA PRAKASH JAIN Company Secretary In Practice 2002, Rathi Palace, Ring Road Surat – 395 002
PCSA –2726
GAURAV VASHISHTHA Company Secretary In Practice 3rd Floor, Kamal Complex, Opp. Gulabi Bagh, Udaipur – 313 001
PCSA –2716
ASHWANI KUMAR KAUSHIK Company Secretary In Practice House No. -73, Saini Pura, V.P.O Jhansa Opp. New App. Sector - 31 Gurgaon -122 001
PCSA –2727
MANISH KUMAR GARG Company Secretary In Practice S-596, 2nd Floor, School Block Shakarpur, Delhi – 110 092
PCSA –2717
REETIKA KOTHARI Company Secretary In Practice 4, Prem Nagar, Roop Sagar Road Udaipur – 313 001
PCSA –2728
1639
NOVEMBER 2011
JAYDEEP N. THANAWALA Company Secretary In Practice S/2, New Rupal Apartment, Opp. Everbela Flats, Ankur Road, Naranpura Ahmedabad -380 013 SONAM AGARWAL Company Secretary In Practice D-3 & 4, Iind Floor, Ekatma Parisar Bjp Complex, G.E. Road, Raipur-492 001 L. RANGARAJU Company Secretary In Practice No. -9, 9th Cross, Cubbonpet Bangalore – 560 002 NEELAM Company Secretary In Practice A-5/160, Sector, Sector – 17 Rohini, New Delhi – 110 089 NENSI GOYAL Company Secretary In Practice 1st Floor, Opp.City Kotwali, G.T. Road Etah – 207 001 RAHUL ANAND Company Secretary In Practice 109, WZ 19A, Opp. Dushera Park Jwala Heri Market, Paschim Vihar New Delhi – 110 063 RUCHI GARG Company Secretary In Practice 4/357, Malviya Nagar, Jaipur -302 017 B. VENKATESH BABU Company Secretary In Practice 6-3-154-159, Flat No.-303, 3rd Floor Royal Majestic, Prem Nagar Colony Near Care Hospital, Road No- 1 Hyderabad -500 004 GAURAV MADAN BAPAT Company Secretary In Practice 635, Prabhakar Chambers, Sadashiv Peth Kumthekarroad, Pune- 411 030 B. RAJEEV BHAMBRI Company Secretary In Practice SCO No.9,IInd Floor, Jandu Tower Millerganj, Ludhiana-141 003 AKHIL ROHATGI Company Secretary In Practice 21, Alipur Road, Civil Lines Delhi- 110 054
PCSA –2729
PCSA –2730
PCSA –2731
PCSA –2732
PCSA –2733
PCSA –2734
PCSA –2735
PCSA –2736
PCSA –2737
PCSA –2738
PCSA –2739
DHAWAL AJITSING CHAVDA Company Secretary In Practice 139, Ist Floor, Super Mall2, Infocity Gandhinagar,Gujarat
PCSA –2740
MANOJ KUMAR YADAV Company Secretary In Practice 110/29, 80 Feet Road, Jawahar Nagar Kanpur - 208 012
PCSA –2741
SWETA SINGHANIA Company Secretary In Practice 24/1, Surenderanath Banerjee Lane Salkia,Tantipara, Howrah - 711 106
PCSA –2742
HRISHIKESH SHIRISH WAGH Company Secretary In Practice 635, Prabhakar Chambers, Sadashiv Peth Kumthekar Road, Pune-411 030
PCSA –2743
MANISH GUPTA Company Secretary In Practice 403, Indraparast Tower, Community Center Wazirpur, Industrial Area Delhi-110 052
PCSA –2744
YASHHODHARA GADGIL Company Secretary In Practice 635, Prabhakar Chambers, Sadashiv Peth Kumthekar Road, Pune-411 030
PCSA –2745
MEENAKSHI MODI Company Secretary In Practice 1, Ram Swarup Khettry Road New Alipore, Kolkata – 700 053
PCSA –2746
SUJIT MANAZHY Company Secretary In Practice 635, Prabhakar Chambers, Kumtekar Road Sadashiv Peth, Pune– 411 030
PCSA –2747
PINKY SINGH Company Secretary In Practice 312-313, P.P. Tower –B, Netaji Subhash Place, Pitampura, Delhi -110 088
PCSA –2748
VIJAY KUMAR SAJJAN Company Secretary In Practice 690, 2nd Floor, 6th Cross, 5th Main Hal 3rd Stage, Bangalore -560 075
PCSA –2749
MANOJ HURKAT Company Secretary In Practice 306, Arth Complex, B/H A.K. Patel House Nr. Mithakhali Six Road, Navrangpura Ahmedabad – 380 009
PCSA –2750
1640
NOVEMBER 2011
News From the Regions EASTERN INDIA REGIONAL COUNCIL Full Day Management Development Programme (MDP) on Managing Retail Business & Supply Chain Management On 3.9.2011 the ICSI-EIRC in Collaboration with Calcutta Business School conducted a Full Day Management Development Programme (MDP) on Managing Retail Business & Supply Chain Management at Calcutta Business School. CS Anjan Kumar Roy, Chairman ICSI EIRC in his address said that in today’s scenario when economic renovation is going on, strategic skills need to be developed and if Company Secretaries can take responsibility of compliance then they can go beyond that jurisdiction and the MDP is a step forward in realizing the dream of learning a new skill. Professor (Dr.) Suman K. Mukherjee, Chief Guest of the programme in his inaugural address said that motivation is a step towards continuous growth and adaptability to change is one of the paths towards success. He also talked about culture, human values and the importance of knowledge and said that education makes a man’s character. Prof. Milan Bhowmik, Calcutta Business School introduced the theme of the programme. The speaker of the First Technical Session was Dr. Bani K. Sinha, Ph.D. (Wharton School, U.S.A.) who spoke about the operations research, the nature and problems of operations research and its relation with supply chain management. He said that Supply chain management (SCM) is the oversight of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumer. Supply chain management involves coordinating and integrating these flows both within and among companies. Understanding demand patterns and efficient planning of supply is the constant endeavour of all supply chain planners. Responsive supply chains are typically characterised by an early understanding of demand signals. The speaker of the Second Technical Session was Prof. Shiv Shankar Tripathi. Prof. Tripathi in his deliberation said that the Indian Retail sector has caught the world’s imagination in the last few years. He said that the retail industry is divided into organised and unorganised sectors. Organised retailing refers to trading activities undertaken by licensed retailers, that is, those who are registered for sales tax, income tax, etc. These include the corporate-backed hypermarkets and retail chains, and also the privately owned large retail businesses. Unorganised retailing, on the other hand, refers to the traditional formats of low-cost retailing, for example, the local
kirana shops, owner manned general stores etc. He explained the concepts of retailing in India, the positioning of retail as a booming industry, the areas of improvement and also the problems faced. The sessions were followed by an interactive Question – Answer session. Half-day Workshop on Analytical Discussion on MCA Circulars & Notifications On 10.9.2011 the ICSI EIRC conducted a Half Day Workshop on Analytical Discussion on MCA Circulars & Notifications at International Management Institute, New Alipore, Kolkata. CS Anjan Kumar Roy, Chairman ICSI EIRC, in his welcome address said that there has been several attempts to incorporate a new Companies Act and several Companies Bills have been placed to the Parliament in the past which have not seen the light of the day. Companies Bill 2009 is before the Parliament of India which has been extensively debated in the standing committee many times and is expected to be passed. However, as in the past, necessary changes are being made to the Companies Act 1956 through circulars and notifications. A series of circulars and notifications are being issued by the MCA since February 2011 which have made major changes in the Companies Act, 1956 and some more changes are in the offing. As such, it has become extremely important for us to critically analyze these changes. Guest of Honour CA (Prof) Asish K. Bhattacharyya, Director, International Management Institute, Kolkata in his address said that he cherishes his association within the fraternity of ICSI members and students. He said that simplification of cost audit rules, XBRL, Corporate Governance, protection of investors is a necessity. He said that the compliance of a company is the prime responsibility of a company secretary and he appreciated the efforts and contributions of ICSI in Corporate Laws. CA Debasish Mitra, Past chairman, EIRC ICAI and CS Ramya Hariharan, Partner, M/s. Argus Partners, in their presentation said that the circulars and Notifications in the year 2011 are shaped up towards speeding up things, the revised Schedule VI of Companies Act relaxing unwanted controls, adoption of video-conferencing for Board meetings, remote location participation in general meetings, new accounting measures like adoption of XBRL etc., submission of documents through electronic mode. They discussed all this with the delegates present and gave a detailed analysis and provided a synopsis of the important circulars and notifications. Career Awareness Programmes During September 2011 the Regional Council organized
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various Career Awareness Programmes which were as under: On 3.9.2011 the Career Awareness Programme on Career as a Company Secretary was conducted at Kendriya Vidyalaya Behrampore, Murshidabad where a presentation was given to the students of Class XII science, commerce and humanities streams by S.Sreejesh, Desk Officer (Career Awareness). He also visited other schools in Berhampore and its outskirts. On 7.9.2011 the career awareness program was conducted at National High School (Boys) for Class XII students and also at Birla High School (Boys). The speaker gave an insight to the students on the opportunities of being a Company Secretary to around 130 students of the school. Mukta Nain, Principal Birla High School (Boys) appreciated the Institute’s efforts in creating awareness among school students on the CS course. On 8.9.2011 the Career Awareness Programme was held at Calcutta Boys School which was attended by around 100 students of the school. On 13.9.2011 the Institute participated in a career awareness and career fair held for the Class XI and Class XII students of Heritage School and the program was a huge success. On 20.9.2011, the Career Awareness Programme was held at Saifee Golden Jubilee School. On 22.9.2011 at St. Stephen’s School Dum Dum for Class XI and Class XII students and was attended by around 450 students. On 2.9.2011 an article on the CS course and profession was published in the career section in a Bengali regional newspaper Bhorer Varta. The Institute’s banner was put up at Loreto College during their annual inter college fest “samagam”. Half Day Workshop on National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business 2011 and Role of Independent Directors in Indian Corporate Sector On 24.9.2011 the ICSI EIRC conducted a Half-Day Workshop on the above topic at International Management Institute, Kolkata. CS Anjan Kr Roy, Chairman, ICSI EIRC, in his welcome address emphasized the importance of Voluntary Guidelines to make businesses responsible entities in the society and to incorporate transparency so that their every action leads to sustainable growth and economic development. He also spoke on the role of independent directors. The speaker on the occasion was CA (Prof.) Asish K. Bhattacharyya, Director, International Management Institute, Kolkata who in his presentation said that an effective Board of Directors is the most essential characteristic of all successful Companies. The Independent Directors play a crucial role in implementing the principles of effective corporate governance. The need for Independent Directors has also arisen due to gradual changes in the mindset of the investors and shareholders. It is important that insiders do not take undue advantage of their position and take unfair advantage. In order to prevent such situation, the demand for Independent Directors
has risen during the recent years in India. Independent Directors can counterbalance managerial infirmities in the company. They would ensure legal and ethical behavior of the company. They are the source of well conceived long term decisions for the company. They are deemed to provide the necessary personal and technical expertise in order to abate fraud, misappropriation by the company or its directors. Asish K. Bhattacharyya in his presentation on National Voluntary Guidelines took into account the good practices, norms and frameworks, which the guidelines have laid down and which will enable businesses to balance and work through the many unique requirements for ensuring profitability and sustainability. He said that the guidelines have been articulated in the form of nine (9) principles and then explained each of the principles. He also explained the mandate and the process, the applicability and the content and structure of the guidelines.
Bhubaneswar Chapter Investor Awareness Programmes The Chapter organized 10 Investor Awareness Programmes covering 3 districts located in small towns and cities of Orissa. The programmes were sponsored under the aegis of Investor Education & Protection Fund, Ministry of Corporate Affairs, Government of India. The date wise career awareness programmes conducted were as under: On 28.8.2011 at Bolangir Town, District HQ, Bolangir, Tarabha, District Bolangir and at Tusura, District Bolangir. On 4.9.2011 at Bhadrakh Town, Bhadrakh District and at Tihidi Block, District Bhadrakh, on 7.9.2011 at Collectorate Conference Hall, Bhadrak, on 11.9.2011 at Asuralil, District Bhadrak and at Dhusuriu, District Bhadrak and on 2.10.2011 at Baripada Sadar and at Baripada Town, Distt. Mayaurbhanj. The programmes were well attended to by a large number of housewives, students, lecturers of schools/colleges, retired persons, general investors etc. A beginner’s guide and Investor related information/literatures both in English and regional language were distributed amongst the participants. Feedback about the programmes were also collected from each of the programmes. After conclusion of the programme a question hour session was kept in each of the programmes wherein several queries on the capital markets, investor related grievances were raised which were clarified by the dignitaries present on the dais. In all the aforesaid programmes the participants expressed their happiness for organizing such programmes by the Ministry of Corporate Affairs, Government of India and also praised the efforts of the ICSI for its awareness campaign in the remote towns and villages of Orissa. They also requested for organizing once again this type of programmes in their locality so that more and more people can get the benefit from this programmes.
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CS J.B. Das, Chairman, CS Arabinda Acharya, Vice Chairman, CS Debadatta Mohapatra, Secretary, CS Priyadarshi Nayak, Treasurer of the Bhubaneswar Chapter and CS S.N. Mallick, Fellow Member of the Institute contributed a lot by addressing in some of the programmes. U.C. Mishra, Office-in-charge of the Chapter co-ordinated the programmes for its grand success. Investor Awareness Programmes Under Resource Persons On 9.9.2011 and 10.9.2011, four Investor Awareness Programmes were conducted by Resource persons at Kodinga, Khatiguda, Nabarangpur Town and Kosagumunda of Nabarangpur district, Orissa. CS Suravi Mohapatra, Associate Member of the Institute and A.K. Nayak, having expert knowledge on the capital market organized the programmes. Career Awareness Programmes Bhubaneswar Chapter conducted the following 25-Career Awareness programmes. On 4.9.2011 at Bhadrak Town , Bhadrak and at Tihidi Block, Tihidi. On 11.9.2011 at Anchalika Mahavidyalaya, Asurali, Bhadrak, on 29.9.2011 at MIITS School of Biotechnology, Bhubaneswar, on 3.10.2011at Larambha College (for Undergraduate student) Larambha, Bargarh, Anchalika Mahavidyalaya (for Undergraduate student) Paharisigida, Bargarh, Gandhi Memorial College (for Undergraduate student), Kalapani, Bargarh, on 4.10.2011at Larambha College (for undergraduate students), Anchalika Mahavidyalaya (for graduate students) and at Gandhi Memorial College ( for Graduate Students).On 15.10.2011 at Attabira College (for Graduates) and Godbhaga College ( for under graduates), 0n 17.10.2011 at Kamgaon Junior College, Dadhibaman College ( for undergraduates) and Mahatma Gandhi College ( for undergraduates), Bhukta, dist. Bargarh, on 18.10.2011 at Dadhibaman College (For Graduate), Bhatli, Dist; Bargarh and at Mahatma Gandhi College (For Graduate), Bhukta, Dist; Bargarh, on 19.10.2011 at Remunda College (For Undergraduate) Remunda, Distict: Bargarh, Tora College (For Undergraduate), Tora, District: Bargarh, Anchalika Kisan Mahavidyalaya,, Bheden, District: Bargarh, on 20.10.2011 at Remunda College (for Graduate), Remunda, Dist: Bargarh and at Tora College (For Graduate), Tora, Dist; Bargarh. Apart from the above programmes meeting with the Principal, HODs of Arts, Science, Commerce of the respective Institutions including one at Rajendra Autonomous College, Bolangir, MPC Autonomous College & Baripada College, Baripada were also held. During the programmes CS J.B. Das, Chairman, CS A. Acharya, Vice Chairman, CS Debadatta Mohapatra, Secretary, CS Priyadarshi Nayak, Treasurer, Bhubaneswar Chapter, CS S.N. Mallick, Fellow Member, CS Sushil Kumar Hota, Practising Company Secretary, CS Ajaya Kumar Rana, CS Subrat Kumar Pradhan, Associate Member of the Institute and Amar Kumar Nayak, Sushanta Kumar
Pradhan, qualified students of the Institute explained the participants about the ICSI, career prospects in the profession, placement services, course contents, fee structure and other facilities being provided to the students. ICSI informative brochures about the course were distributed at the gathering. ICSI Teacher’s kits were also provided to the Institutions. Bhubaneswar Chapter provided all logistic support for the above programmes. The programmes and other activities were co-ordinated by U.C. Mishra, Office-in-Charge of the Chapter. 30th Foundation day Celebration of the Chapter On 12.09.2011, Bhubaneswar Chapter celebrated its 30th Foundation Day amidst the presence of the members, students, invited guests, faculty of oral coaching classes and dignitaries. D.K. Ray, former Chief Commissioner, Income Tax and former Chairman, OERC and Director, OPTCL & OMC Ltd. was the Chief Guest on the occasion. While addressing the august gathering, Roy said about the important role of Company Secretary to carry out best Corporate Governance and complying with various legal provisions of the Companies Act. He said that the role of CS is vital for taking various important decisions in a Company and they have to take active participations for better Corporate Social Responsibility. The Company Secretaries role is such that they have to act courageously and with dignity without any fear in each of the Companies. They have to advise the Board on various important matters and their suggestions are utmost important to the companies, he opined. He thanked the ICSI for taking various initiatives in recent days for corporate sector. In his address CS J.B. Das, Chapter Chairman thanked the participants for their support to the Institute as well as the Chapter. He also highlighted the future plan for the Chapter and creating awareness amongst the various organizations about the ICSI and its activities. He further informed that the Chapter is taking initiatives for organizing more programmes in remote areas of the State to create awareness amongst the schools/colleges about the CS course. CS A. Acharya, Vice Chairman, Bhubaneswar Chapter said that the activities of the Chapter has increased many fold and the Chapter has got the status of Grade-B and further wished that it would get the status of Grade-A in the next 4-5 years, if there is more number of students enrolled in the course and more members added to the list of the Chapter. He further urged the students and members to ensure practising Corporate Governance effectively and efficiently so as to contribute to the Public good and achieve the mission of our Institute. The Chapter is making all out efforts in this respect. During the programme past Chairmen of the Chapter CS K.N. Ravindra, CS L.D. Sahoo, CS S.S. Sonthalia, Past Ex-Officio member, EIRC, CS Biswajit Bedamata, Associate Member,. H.K. Sahoo, Professional Programme students shared their
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views and experience with the Institute and the Bhubaneswar Chapter and also sought support from all the members and students for the growth and development of the profession. During the programme while H.K. Sahoo, R.K. Senapati, Professional Student awarded with cash prize for the success in Regional Level Quiz Completion Vandana, Foundation Student awarded for securing 1 st in the Essay Writing Completion held on 12.8.2011 during the ICSI Corporate Governance Week celebration. CS Debadatta Mohapatra, Chapter Secretary read out the 30th Annual Report of the Chapter highlighting the activities undertaken by the Chapter. About 140 participants were present during the programme. Members at the beginning of the programme observed silence for a minute as a mark of respect to late Jayanta Mahapatra, faculty of Chapter oral coaching classes and Associate Member of the Institute. It was appealed to all the members to contribute to the Chapter for the funds created to help the bereaved family of Jayanta Mahapatra. Earlier, the Chapter also organized a condolence meeting for the departed soul on 29.8.2011 at its premises. Image Building Exercise On 22.08.2011, CS A. Acharya, Vice Chairman of the Chapter met Jugal Kishore Mohapatra, IAS, Principal Secretary to Government, Department of Finance, Orissa. During the interaction Jugal Kishore Mohapatra, IAS was briefed about the ICSI, its functions and the activities of the Bhubaneswar Chapter. Further he was apprised about the requirement of Corporate Governance of CS course for the nominee directors of State PSUs. Mohapatra was happy to know the initiatives taken by the ICSI in spreading Corporate Governance awareness. Meeting with Government Officials On 13.9.2011 CS, J.B. Das, Chairman and CS Arabinda Acharya, Vice-Chairman of the Chapter met Sourav Garg, IAS, Secretary to Government of Orissa, Public Enterprise Department and discussed about the Institute and the role played by the Institute in creating awareness for Corporate Governance. As a part of such effort it was proposed to Garg that the Bhubaneswar Chapter of ICSI can conduct a programme on Corporate Governance for the State nominee directors on State PSUs and a letter to that effect was handed over to him. Further, the Chapter made an interaction with the Collector of Jagatsinghpur & Bhadrak District of Orissa who were apprised about the ongoing Investor Awareness Programmes being undertaken by the ICSI, Bhubaneswar. Management Skills Orientation Programme (MSOP) On 15.9.2011 the Chapter conducted its 1st MSOP at its premises. Students from various parts of the state attended the 15 days training programme. On 2.10.2011 at the valedictory
session training completion certificates were issued to all the participants by J B Das, Chapter Chairman.
Hooghly Chapter Corporate Governance Week From 8.8.2011 to 12.8.2011 Hooghly Chapter of EIRC of The ICSI celebrated the Corporate Governance Week. The ICSI has always promoted the good governance practices by the corporate bodies, so celebrating the Corporate Governance Week came naturally to the Institute to propagate the idea. The Chapter organized a workshop in collaboration with the Bombay Stock Exchange Limited on 7.8.2011 as the inaugural programme for the Corporate Governance Week at Howrah. During the programme Prashant Jha, Executive, BSE and some other prominent experts from the Capital market emphasized the social development through wealth management. Further the Chapter celebrated the Go Green campaign throughout the schools and offices at Rishra. Hooghly Chapter endorsed the Save Tree initiative for the environment protection and for conservation of water and natural resources. By means of banner display, the Chapter tried to create awareness amongst the people about the environment conservation. The Chapter reaffirmed its pledge for Save Earth campaign and to shoulder the responsibility for safe and healthy environment for present and the coming generations.
North Eastern Chapter Study Circle Meetings On 24.9.2011 the Chapter conducted a study circle meeting on Assessment Proceedings under Income tax Act. Guest Speaker Brajesh Sharma, Advocate, Guwahati High Court addressed on the topic from the root level and explained in details every aspect of Income Tax Act including assessment proceedings. During the Question-Answer session that followed the queries raised by the participants were satisfactorily replied by the speaker and the Chairman, ViceChairman and Secretary of NE Chapter of EIRC of the ICSI. The interactions were marked with overwhelming response. Again on 10.9.2011 a Study Circle Meeting on Workshop on Service Tax was held at Guwahati. Vijay Chopra, Advocate, Guwahati High Court was the speaker. A good number of members and students participated. NORTHERN INDIA REGIONAL COUNCIL South Delhi Study Group Meeting on XBRL- Practical Exposure on Creation of Instant Document On 9.9.2011 at the South Delhi Study Group Meeting on XBRL – Practical Exposure on Creation of Instant Document, CS Rajinder Kapoor of Webtel was the speaker. A good number of members were present.
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Workshop on Law and Procedure of Drafting and Conveyancing
North Zone Study Group Meeting on LLP – The Next Generation Entity
On 10.9.2011 at the Workshop on Law and Procedure of Drafting and Conveyancing Vimla Yadav, Member, Company Law Board, Northern Region was the Chief Guest. The speakers were CS Nesar Ahmad, Vice- President, the ICSI; CS P.K. Mittal and CS Atul Mittal, Council Members, the ICSI; Vibhu Bhakhru, Senior Advocate and CS Saurabh Kalia.
On 25.9.2011 at the North Zone Study Group Meeting on LLP- The Next Generation Entity, Vidhi Malhotra, Manager Regulatory Services (PWC) was the speaker.
Meeting of Company Secretaries in Practice to discuss Issues relating to Stamp Duty on Share Certificate On 15.9.2011 at a Meeting on the above topic Ravinder Kumar, SDM, Revenue Department, Government of NCT of Delhi was the speaker. A good number of Members were present. Study Circle Meeting on Employees Stock Options Plans (ESOPs) On 16.9.2011 at a Study Circle Meeting on Employees Stock Options Plans (ESOPS) CS Uma Shankar Acharya Manager, Consulting ESOP Direct was the speaker. The study circle was attended by a good number of members.
Investor Awareness Programmes On 14.9.2011 an Investor Awareness Programme on Understanding the Capital Market was held at Delhi School of Professional Studies & Research, Rohini, Delhi.Prof. V K Goyal, Dean of DSPSR; CS J K Bareja, Associate Professor, University of Delhi, CS Pankaj Kumar, Consultant – Legal & Finance were the speakers. Again on 17.9.2011 the Investor Awareness Programme on Listing and Delisting of Securities /Takeover Code was held at ICSI-NIRC Building, Delhi. CS Pankaj Kumar, Consultant, (Legal & Finance); CS Suman Kumar, Head(Legal) & CS, SMC Global Securities Ltd. Were the speakers.
Half Day Workshop for Female Company Secretaries on Professional Women – Realigning Priorities
On 18.9.2011 the Investor Awareness Programme on Capital Market – Investing in IPOs was held at Anant Cooperative Group Housing Society, Sector 4, Dwarka, New Delhi. Lalit Khanna, Sr. Consultant, Globe Capital Market Ltd.; CS J K Bareja, Associate Professor, University of Delhi, CS Ashok Juneja, Advocate the speakers.
On 17.9.2011 at a Half Day Workshop for Female Company Secretaries on Professional Women – Realigning Priorities Renuka Kumar, Joint Secretary, Ministry of Corporate Affairs; Vijaya Sampath, Corporate Business Advisor, Bharti Group; Bhavna Barmi, Sr. Clinical Psychologist, Escorts Heart Institute and Research Centre and Gayatri Kapoor, Corporate Trainer were the speakers.
On 21.9.2011 another Investor awareness Programme on Investment Opportunities in the Prevailing Financial market was held at Keshav Mahavidyalaya, Pitampura. Dr. Madhu Pruthi, Principal, Keshav Mahavidyalaya, CS J K Bareja, Associate Professor, University of Delhi, CS Pankaj Kumar, Consultant – Legal & Finance & CS Anupam Jha, Consultant were the speakers.
East Zone Study Group Meeting on Latest Circulars/ Notifications issued by MCA
On 28.9.2011 the Investor Awareness Programme on Functioning of Financial Markets & Demat Account was held at Laxman Public School, New Delhi. Dr. Usha Ram, Principal Laxman Public School; CS J K Bareja, Associate Professor, University of Delhi, CS G P Madaan, Director, Rigma Capital Services Ltd. & Versha Agarawal, AGM, SEBI were the speakers.
On 17.9.2011 at the East Zone Study Group Meeting on latest circulars/notifications issued by MCA, CS Ranjeet Pandey, Chairman NIRC-ICSI was the speaker. Seminar on Indirect Taxes – Professional Avenues On 24.9.2011 at the seminar on Indirect Taxes – Professional Avenues V K Garg, Joint Secretary, CBEC, Ministry of Finance; Upender Gupta, Additional Commissioner(Service Tax); CS J.K. Mittal; CS Bimal Jain; Puneet Agrawal, Advocate; H L Madan, Advocate and Rakesh Garg, Chartered Accountant were the speakers. West Zone Study Group Meeting on Compliance Regulations of SME On 24.9.2011 at the West Zone Study Group Meeting on Compliance Regulations of SME Anjali Aggarwal, AVP, Corporate Professionals Capital Pvt. Ltd. was the speaker.
All these programmes were attended to by a good number of teachers, faculty members, members of the profession, investors and general public. Career Awareness Programmes The Regional Council organised Career Awareness Programmes as per the details given hereunder: On 1.9.2011 the Career Awareness Programme was held at Apeejay School, Sainik Vihar, Delhi; on 2.9.2011 at Govt. Boys Sr. Sec. School, Bindapur, Delhi; on 6.9.2011 at Sarvodaya Bal Vaidyalaya, Moti Nagar & Govt. Boys Sr. Sec. School, Mangolpuri, Delhi; on 8.9.2011 the Career Awareness
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Programme was held at DLF Public School, Sahibabad; on 9.9.2011 the Career Fair was organized at Rakiya Pratibha Vikas Vidyalaya, Rohini, Delhi; on 12.9.2011 the Career Awareness Programme was held at Nav Shakti Girls Sr. Sec. School, Vishnu Digambar Marg, Delhi; on 14.9.2011 at Delhi School of Professional Studies & Research , Rohini, Delhi; on 15.9.2011 at Sarvodaya Vidyalaya, Aliganj and Sarvodaya Bal Vidyalaya, Janakpuri, Delhi; on 16.9.2011 at Govt. Boys Sr. Sec. School, Katevda, Delhi; on 19.9.2011 at Guru Teg Bahadur 3rd Centenary School, Mansarover Garden, Delhi; on 21.9.2011 at Keshav Mahavidyalaya, Pitampura, Delhi; on 23.9.2011 at Sachdeva Public School, Sector 13, Rohini; on 27.9.2011 at Bharti College, Janakpuri; on 28.9.2011 at Laxman Public School, Hauz Khas; on 29.9.2011 at Govt. Boys Sr.Sec. School, Krishna Nagar and on 30.9.2011 at Govt Girls Sr. Sec. School, East of Kailash, Delhi. CS J.K. Bareja, CS Shiv Kumar Tyagi, CS Nitesh Kumar, CS Anupam Jha, CS G.P. Madaan, CS Pankaj Kumar, T.R. Mehta and Himanshu Sharma addressed during the Career Awareness Programmes. In the above Institutes, the students were apprised about the mode of registration in the course, syllabus, structure of the course and also the avenues available after completion of the company secretary ship course both in employment and in practice. Pamphlets of Career in Company Secretary ship course were distributed to the students.
Chandigarh Chapter Study Circle Meeting on Latest Amendments in the Companies Act On 21.9.2011 Chandigarh Chapter of NIRC of the ICSI organized a Study Circle Meeting to discuss the Latest Amendments in Companies Act. Anil K.Aggarwal, Practising Advocate was the key speaker who in his address discussed at length the latest amendments in the Companies Act and the latest notifications issued by the Ministry of Corporate Affairs. More than 30 members attended this Study Circle Meeting.
Gurgaon Chapter Study Circle Meeting on FDI & Foreign Establishment in India On 1.10.2011 Gurgaon Chapter of NIRC of the ICSI organized a study circle meeting on FDI and Foreign Establishment in India at its premises. The Speaker of the event was Atul Mittal, Central Council Member, the ICSI & Director- Tax and Regulatory - Deloitte Touche Tohmatsu India Pvt.Ltd. The Purpose of the meet was to equip the members about recent FDI Circular and to give an idea about compliances required to establish Branch and Liaison office in India. Dhanjay Shukla, Regional Council Member-NIRC, in his
welcome address emphasized that FDI is a very alluring area of practice and one should work upon building practical and theoretical base on this front. Atul Mittal’s presentation was very comprehensive and covered various aspects relating to Branch office and Liaison Office like who can set up Branch and Liaison office, what are different routes possible, what activities these offices can perform, what documents are required for taking permission from R.B.I, compliances required every year. Thereafter Mittal discussed Circular No.2 of FDI Policy of 2011 wherein clarity has been provided on various issues like FDI in LLP, treatment of equity shares, compulsorily convertible debentures with call and put option as ECBs, time period for seeking approval from FIPB for issuing shares. At the end of his presentation he talked about sector specific changes introduced in this Circular in sectors like Agriculture & Animal Husbandry Sector, Entertainment and Media Sector, Retail & Consumer, and Real Estate Sector. His approach was very practical and his presentation was praised by all. The session was very enlightening. Atul Mittal also replied the queries raised by the members present. More than 25 participants attended the meeting.
Jaipur Chapter Press Conference On 29.09.2011 Jaipur Chapter of NIRC of the ICSI organized a press conference, in which brochure on the theme Youth & Professional Excellence was released by Dr. Girish Goyal, Chapter Chairman along with Shyam Agarwal, NIRC member, Vimal Gupta, Secretary and Rajesh Gupta, Executive Officer. The brochure was released in the press conference where around 20 media people from print and electronic media were present. Notable among them were media people from Dainik Bhaskar, Rajasthan Patrika, Daily News, Punjab Kesari, Rajdoot, Daily Navjyoti, ETV, Bhaskar TV, etc. Foundation Day Celebration of the Chapter On 16.10.2011 the 36th foundation day of the Chapter was celebrated. On this day a blood donation camp and plantation of Saplings were organized. A large number of members, students, other Managing Committee Members of the chapter including staff donated blood. The blood donation camp was organized in association with Santokba Durlabhji Memorial Hospital. Career Awareness Programmes On 17.10.2011 Jaipur Chapter of NIRC of the ICSI organized Career Awareness Programmes at five reputed colleges of the Bikaner including Dungar College, Maharani Sudarshana College, Jain PG College, Jain Girls College, BJS Rampuria (Law) College and Vivekanand Sr. Secondary School. In the
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aforesaid career awareness programmes, Chapter Chairman Dr. Girish Goyal apprised the students about the mode of registration in the course, syllabus, structure of the course and also the avenues available after completion of the Company Secretary ship Course both in employment and in practice. ICSI Teachers kit, Brouchers, Pamphlets, posters received from the institute for the above programmes were distributed at all these programme. During these programmes the queries raised by the students were replied by Rajesh Gupta, Executive Officer along with Heena Tuteja, CS Final passed student of the Institute. Around 900-1000 students taken together attended the programmes.
Lucknow Chapter 1st Management Skills Orientation Programme (MSOP) From 10.9.2011 to 24.9.2011 Lucknow Chapter of NIRC of the ICSI organized its 1st Management Skills Orientation Programme for fifteen days at Dr. Ram Manohar Lohiya National Law University. The programme coordinator was Maitreya. The Inauguration of 1st MSOP was presided over by Dr. Balraj Chauhan, Vice Chancellor Dr. RMLNLU, CS Rajiv Bajaj, Central Council Member, the ICSI, Dr. Vishalakshi, Associate Professor (LAW) Dr. RMLNLU, Prof A.P. Singh, Dr. RMLNLU, Prof. K.A.Pandey, Dr.RMLNLU. Dr. Balraj Chauhan congratulated ICSI for organizing such type of rigorous training programme at Lucknow for the benefit of participants of Lucknow & nearby areas. He wished all the success to the programme. Speaking on the occasion CS Rajiv Bajaj said that Company Secretaries play an important role in the Corporate world and are indispensable asset for any organization. MSOP is training programme with orientation for development of management skills to deal with real life corporate challenges. As far practicable, the mechanism for MSOP is through Case Studies, Story Telling, Group Discussions, Role Playing, simulation exercises and the like so as to provide a real-life practical exposure. CS Amit Gupta, Chairman, Lucknow Chapter of NIRC of ICSI informed that experts from various parts of the country will come to interact and impart knowledge on various critical aspects relating to the profession & equip them with modern management tools & techniques to provide best of professional services to the Corporates. On the second day Corporate Trainer Chandra Shekhar Varma gave tips for 3600 Personality Development to the MSOP participants. Varma, a corporate trainer with diversified and vast experience with top companies like - The Times of India and Reliance Retail, started his presentation with an icebreaking session where the participants had an informal interaction in which they got to know each other better and
discussed their strength and weaknesses. The second session was a personality development session where he explained to the participants the key attributes which contribute towards personality development through “LIGHT” model particularly - appearances, intelligence, communication skills, health and temperament. He also talked about the important qualities one should develop to improve his/her personality. The participants also had a group discussion session after which Chandrashekhar Varma gave the participants useful tips on how to succeed in group discussion and explained the Dos and Don’ts in a GD. On the Third day of MSOP CS Ranjeet Pandey Chairman, NIRC of the ICSI took a session on SEBI Take-over Code. The second session started with presentation on Life management Skills by CS Dhanajay Shukla, Member, NIRC of ICSI. The session resulted into a morale boosting session, where every participant felt enriched. The participants were also guided on the difficulties and challenges faced by a CS in practice by CS Ranjeet Pandey and CS Amit Gupta, Chairman, Lucknow Chapter of the ICSI. T.R. Mehta, Executive Officer of NIRC of the ICSI shared his valuable experience of organizing MSOPs. On the Fourth day Chandra Shekhar Varma dealt with the first session on communication skills where the participants had an informal interaction and shared their common communication fears. Chandra Shekhar Varma explained the communication process with the importance of 7Cs which include Clarity, Conciseness, Completeness, Correctness, Continuity, Courtesy and Consideration. He asked the participants to present a mock press conference where four participants were asked to enact various personalities like Rahul Gandhi, Baba Ramdev, Mahendra Singh Dhoni and Rakhi Sawant. The other participants were playing the role of Media. The participants, playing the role of media in the act asked queries to the participants, enacting the role of Public personalities. This act helped the participants to understand the importance of communication skills. In The second session, Chandra Shekhar Varma explained the barriers of communication. He gave a live example by a story telling exercise between few participants with the emphasis on the importance of listening, retaining and conveying the complete information through communication skills. Other Sessions in the 15 Days Management Skills Oriented Programme Included Positive Thinking workshop taken by Corporate Trainer Sunil Ji Garg, and another session Gifts For Self was Taken by Experienced faculty from Dr.RMLNLU Purnima Agarwal. Prof Purnima Agarwal is having 37 years of experience in psychology. Her session made the students enlightened as she took the students in a very light environment made them feel very comfortable with her. She prepared a
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questionnaire which enabled the students in understanding what is their personality trait, thereby improving what is lacking in them, understanding whether the person is an Introvert, Extrovert, Judger, Senser, Feeler, Persever, intuitive etc. On 17.9.2011 the participants went for an outing, which was a fun and learn programme for them. The other sessions were presided by Saif Ahmed Khan who took the participants through Computer Literacy Skills. Prof Prasenjit Kumdoo of Dr.RMLNLU took 2 sessions one on Arbitration and the second one on Stress Management. The second session in particular was very much interesting as Prof Kundoo asked the participants to do Bhastrika Pranayama for stress management, he made every body do the pranayama 3 rounds and for 20 times. He played a very enlightening music while asking the participants perform pranayama, the participants expressed their happiness towards Prof. Kundoo for teaching them such beautiful asana for stress management. The session was presided over by CS Abha Sethi Tandon Treasurer, Lucknow Chapter of NIRC of the ICSI. There was also a session from Prof Yashovardhan Swaroop on Legal Remedies, CS Adesh Tandon, on Appearance Before Judicial/quasi Judicial Authorities, CS Rakesh Srivastava, Past Chairman Kanpur Chapter, Pavan Kapoor, CEO, HCBL Bank. For the project presentation the Participants were divided into 4 groups (Challengers, Go-Getters, Humain, Leaders) consisting of 5 people, who presented their topics on the last day of the Programme, which was won by Go-Getters and for the second position there was a tie between Leaders and Challengers. The best participant award went to Umang Mehrotra and Swasti Tripathi. The valedictory session was presided over by Hriday Narayan Dixit, Member of Legislative Council, U.P who in his address congratulated the Lucknow Chapter of ICSI for taking such initiative of holding MSOP in Lucknow. He said that Company Secretaries has a very vital role to play in the overall economic development of Corporate/society. He also honoured the Company Secretary Students who secured names in the merit list, along with presenting certificates to MSOP participants with medals. Guests of Honour on the occasion were CS Sanjay Grover, Central Council Member, the ICSI, CS Deepak Kukreja, Vice Chairman, NIRC of the ICSI, CS Vineet Chaudhary, Member, NIRC. The participants were given training in various management aspects including communication, efficiency, effectiveness, and various other knowledge areas. CS Sanjay Grover informed that MCA has announced mandatory filing of Financial Statements in XBRL format from the financial year 2010-2011 for all Companies listed on stock exchange including Indian Subsidiaries or having paid up share capital of Rs. 5 crores or more or having turnover of Rs. 100 crores
or more (except Power, Insurance, Banking NBFC Companies). This means that those class of Companies have to file their financial statements in XBRL format along with the Annual return to ROC / MCA before 30-Nov-2011. The circular mentions that there is no additional Companies which have to file their financial statements in XBRL format along with the Annual return to ROC / MCA before 30-Nov-2011. The circular mentions that there is no additional penalty or fee if the filing is done on or before 30-Nov-2011. He also informed that Company Secretaries, being chief Compliance Officer has to play a major role in XBRL reporting. He also explained about the changes proposed in new Companies Bill. Deepak Kukreja, Vice Chairman, NIRC informed that All types of organizations can use XBRL to save costs and improve efficiency in handling business and financial information. Because XBRL is extensible and flexible, it can be adapted. A press Conference was also organized at the end of the day.
Noida Chapter 7th Management Skills Orientation Programme (MSOP) From 5.9.2011 to 19.9.2011 Noida Chapter of NIRC of the ICSI organised its 7th Management Skills Orientation Programme at Jaipuria Institute of Management, Noida. The programme was inaugurated by CS Ranjeet Pandey, Chairman NIRC. The Chief Guest of the session CS Ranjeet Pandey, Chairman NIRC of the ICSI, shared his huge experience with participants and requested them to work towards betterment of the CS profession. Also, other dignitaries present, enlightened the students about practical insight of the CS Profession and emphasized on professional ethics, professional duties and responsibilities, importance of MSOP, and how to keep oneself updated about the recent amendments, etc. Valedictory Session: On 19.9.2011 at the Valedictory Session of the MSOP CS G P Madan, Past Chairman of NIRC of the ICSI was invited as the Chief Guest. He congratulated the participants for successful completion of training and distributed the MSOP Completion Certificates to them. Best Participant Awards: Anubhav Jain and Anjali Gupta were selected as the best participants of the 7th MSOP and Syed Talib Mehdi and Rashmi Santosh Mishra as best presenters. They were given certificate of appreciation and memento.
SOUTHERN INDIA REGIONAL COUNCIL 36th Regional Conference On 19 and 20.8.2011 the ICSI–SIRC organized its 36th Regional Conference on ‘Company Secretary – Intellectual Driving Force for a Sustainable Business in the Go Green Era’ at Hotel
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Taj Coromandel, Chennai. N Ram, Editor-in-Chief, The HINDU magazine, Chennai inaugurated the Conference. In his address, N Ram suggested the members to go beyond the legal regulatory system on key issues and focus on conceptual to change the whole paradigm of good governance. He also observed that the issue of intellectual asset management as a key to success is increasingly talked about in many organizations in many contexts, especially the corporate sector in leading economies, but in India there is relatively less awareness of the potential of intellectual asset management. He also said that, ICSI, as a body that focuses on capacity or capability building developing a professional community of CS as a cutting-edge intellectual force, it is important for the ICSI to figure out the opportunities, responsibilities and challenges for the professionals. S Santhanakrishnan, Chairman, The Catholic Syrian Bank Limited, Thrissur was the Guest of Honour. CS Ravi B, Chairman, ICSI-SIRC in his welcome address briefed the various activities taken up by the ICSI-SIRC in developing the profession and thanked the members and the delegates for making the Regional Conference a success. Gopalakrishna Hegde, Council Member, The ICSI introduced the theme, R Sridharan Council Member, The ICSI introduced the Chief Guest and C Sudhir Babu, Council Member, The ICSI introduced the Guest of Honour to the delegates. Nesar Ahmad, Vice President, The ICSI, in his address observed that the ethics and morality should go hand in hand in business and instilling the DNA of integrity is the need of the hour for effective corporate governance. Anil Murarka, President, The ICSI said that the ICSI had formulated a Vision 2020 document and a decadal action plan for the next ten years and the ICSI is also in consultation with other professional Institutes for streamlining training structures for students who wanted to have dual professional qualifications. The President also focused on the various initiatives being taken by the Institute for the improvement of the profession. S Santhanakrishnan, Guest of Honour, in his address observed that the company secretaries are the guardians of the compliance and corporate governance and requested the company secretaries to be updated with the latest happenings in the corporate laws. S. Santhanakrishnan also suggested that the three professional Institutes — the ICAI, the ICWAI and the ICSI — should work together in evolving a common code for corporate governance. He urged the professional bodies to step out of their dependence on regulatory support and be a leader to the government in setting new benchmarks for corporate governance and opined that they should be instrumental in shaping government thinking on corporate laws into the future. A souvenir brought out on the occasion was released by N
Ram. Prizes and certificates were distributed to the meritorious students of the ICSI – SIRC by the dignitaries. First Technical Session: The First Technical Session was on the theme ‘Challenges and Opportunities for CS in MSME’. The Chairman for the session was S Sivagnanam, Director, MSME Development Institute, Chennai and the speaker for the session was V Babu Sankara Subramanian, Company Secretary in Practice, Chennai. In his opening remarks, Sivagnanam presented an overall picture of the MSMEs in India and the opportunities for CS in MSMEs. Babu Sankara Subramanian elaborately analyzed the phenomenal changes and the opportunities for CS in MSME that have taken place in the last two decades. The speaker explained that the MSME Act 2006 came into force with the main objective of promoting the MSMEs and to develop and enhance competitiveness. Second Technical Session: N Ramanathan, Managing Director, Ponni Sugars [Erode] Limited, Chennai was the Chairman for the Second Technical Session on the theme ‘Meetings through video conferencing – boon or bane – A critical analysis’. J Sundharesan, Company Secretary in Practice, Chennai was the speaker for the session. In his opening remarks as Chairman, Ramanathan pointed out the pros and cons of the meetings through video conferencing and observed that the video conferencing will help Indian companies bring international input at the board level, without facing logistical problems. J Sundharesan spoke on the modalities behind the meetings through video conferencing and also concentrated on conditions prescribed by the MCA regarding video conferencing, and sitting fees for directors. Third Technical Session: ‘Regulatory framework and emerging opportunities for CS in Foreign Direct Investments’ was the theme for the Third Technical Session. Arvind K Salvi, Former DGM, Reserve Bank of India, Mumbai and V N Shiv Shankar, Legal Adviser and Corporate Law Consultant were the speakers for the session. Salvi spoke on the overall regulatory framework of FDI in India. Shiv Shankar elaborated the factors in FDI transaction cycle, Share Subscription Agreement, Shareholders Agreement and exit options for foreign investors. Shiv Shankar also suggested that expertise in corporate laws with financial background makes Company Secretaries an ideal fit for transaction structuring, negotiations, documentation and closures. Fourth Technical Session: The Fourth Technical Session was on the theme ‘Responsibilities of CS in the emerging Capital Market’. The session was chaired by V S Sundaresan, Chief General Manager, SEBI, Mumbai. The speaker for the Session was Jagadarini T Sampath Kumar, Corporate Consultant, Chennai. Sundaresan rightly impressed the members about the increasing responsibilities of Company Secretaries in the
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Capital Market. Sundaresan also advised the members to comply with the various regulatory bodies including SEBI. Jagadarini elaborated the delegates on the present scenario of the capital market in India. She also threw light on the various avenues where the responsibilities of Company Secretaries are more. She also observed that a Company Secretary can play an effective role as Advisor / consultant in all new reforms in the financial market, knowledge partner and end to end solution provider. Fifth Technical Session: K K Balu, Former Vice Chairman, Company Law Board, Chennai was the Chairman for the Fifth Technical Session on the theme ‘Rights of Shareholders and remedies when infringed’. P H Arvindh Pandian, Advocate, Chennai was the speaker for the session. Balu briefed the delegates about the updates in the corporate laws in general and rights of shareholders when infringed, in particular. P H Arvindh Pandian elaborately spoke on the various rights of shareholders when infringed, with narrations. The speaker also focused on the various remedies available to the shareholders. In all the five technical sessions, the delegates actively interacted with the speakers. Many queries were raised before the speakers, which were aptly clarified by them. Valedictory Session: At the valedictory session Chief Guest Suki Sivam, Tamil Cultural Icon and Speaker, Chennai spoke on the human relations in the present day context. Suki Sivam also suggested the delegates to maintain a stress free balanced life, so as to serve their respective professions in a befitting manner. 9th Management Skills Orientation Programme (MSOP) Inaugural Session: The ICSI-SIRC organized its 9 th Management Skills Orientation Programme [MSOP] from 12.9.2011 to 28.9.2011. CS Ravi B, Chairman, ICSI-SIRC inaugurated the MSOP. Earlier Sarah Arokiaswamy, Joint Director, ICSI-SIRO welcomed the participants and apprised them about the programme. She also explained the participants about the guidelines of the programme. In his address, CS Ravi B, Chairman, congratulated the participants on completing the professional programme. Ravi urged the participants to make maximum utilization of the resource persons of the programme by making the sessions more interactive. He urged the participants to keep them updated in various laws relating to the profession. The Chairman also advised the participants that communication skills are more important to the Company Secretaries and need to be developed. CS Ramasubramaniam C, Member, ICSI-SIRC urged the participants to be more attentive during the session and be updated with the latest provisions of the various acts related to the profession.
Valedictory Session: On 28.9.2011 at the Valedictory Session of the MSOP Sarah Arokiaswamy, Joint Director, ICSI-SIRO welcomed the Chief Guest and participants and congratulated them on the successful completion of the MSOP. S Dhanvanth Kumar, Vice President, Legal & Company Secretary, Carborundum Universal Limited, Chennai was the Chief Guest who in his address stated that the role of Company Secretaries has expanded. He added that besides looking after the traditional role relating to compliance, investor services, legal, etc, the role of Company Secretaries has been expanded to the services relating to mergers and acquisitions, corporate governance, corporate communication, etc. Dhanvanth Kumar also explained in detail the role of Company Secretary in compliance, legal and governance. He advised the participants to break the boundaries to grow at a faster rate. Earlier, CS Sridharan R, Council Member, the ICSI in his address to the participants, explained the various initiatives taken by the Institute for the growth of the profession. He also opined that the proposed new Companies Bill will bring more scope to the company secretaries’ profession. Sridharan also advised the participants to be continuous learners and urged them to create a network among professionals, exchange ideas and be updated. CS Ravi B, Chairman, ICSI-SIRC advised the participants to be a continuous learner. He also urged them to regularly read newspapers / Chartered Secretary Journal / case laws, so as to be updated in the matters related to the industry. B Ravi also requested the participants to attend the Study Circle Meetings/ Seminars/Conferences of the ICSI regularly and also to contribute to the Company Secretaries Benevolent Fund. S Dhanvanth Kumar, CS Sridharan R, and CS Ravi B distributed the certificates to the participants. Study Circle Meeting on Recent Developments in Service Tax On 29.9.2011 the ICSI-SIRC organized a study circle meeting on Recent Developments in Service Tax which was addressed by V Rajalakshmi, Chartered Accountant, Chennai. V Rajalakshmi presented an overall view of the Service Tax in India, the formation and function of the governing body of the Service Taxes in India. The speaker elaborated on the recent developments in service tax. She explained that filing in ST 3 through online has been made mandatory for all the assesses with effect from 01st October 2011 and e – filing for tax payment beyond Rs. 10 lakhs has also been mandatory. She further dealt with the important dates of filing the returns. The speaker also elaborated on the important rules relating to service tax and the interest, penalty and prosecution provisions. The members actively participated in the discussion with the speaker.
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Half-day Seminar on SME Exchange On 17.9.2011 The Bangalore Chapter of the ICSI organised a Half-day Seminar on “SME Exchange” organized in association with Bangalore Chamber of Industry and Commerce at Hotel Taj West End, Bangalore. Lakshman Gugulothu, CEO, BSE-SME Exchange, Mumbai, Anurag Bansal, Wholetime Director, SMC Global Services Limited, New Delhi, Anubhav Tripathi, Manager – Investment Banking, Karvy Investor Services, Hyderabad and CS. M K Ananda Kumar, Chief Corporate Services and Company Secretary, National Commodity and Derivatives Exchange Limited, Mumbai were the Speakers.
Company Secretary ship Course. Brochures containing brief details of the Company Secretary ship Course were distributed to the students and the film on Career as a Company Secretary was also screened during the programmes. Study Circle Meeting on Recent Circulars and Notifications issued by the Ministry of Corporate Affairs
The Speakers in their presentation on SME Exchange subtly brought up the awareness among the Small and Medium enterprises, market intermediaries and investors about the BSESME Exchange/Platform and stated that the Capital Market Regulator SEBI has given ‘In Principle’ approval to Bombay Stock Exchange (BSE) Limited, to launch the BSE-SME Exchange and also highlighted the latest events happening with regard to SMEs. They also highlighted the long term benefits of investing in SMEs. There was lively interaction by the 52 members present.
On 22.9.2011 a Study Circle Meeting on Recent Circulars and Notifications issued by Ministry of Corporate Affairs was organised by the Bannerghatta Study Circle, Bangalore. CS A. M. Sridharan, Ex-Dy.ROC, Karnataka and Practicing Company Secretary was the Speaker. CS A M Sridharan, in his presentation elaborated in detail the Green Initiatives taken by MCA for conducting General Meetings and Board Meetings through Video conferencing and also in Service of notice and Annual Report to shareholders by e-mail; Electronic voting and postal ballot; Filing of Balance Sheet and Profit and Loss Account in XBRL Mode; Payment of remuneration to managerial person; Online incorporation of companies within 24 hours; Online approval of CG under section 297 of the Companies Act, 1956 and Cost Audit Rules, etc. There was a lively interaction throughout the session by the 48 Members present.
Career Awareness Programmes
6th Mangement Skills Orientation Programme (MSOP)
The Bangalore Chapter of the ICSI conducted Two Career Awareness Programmes during the month of September 2011. The details are as under:
On 5.9.2011 the Bangalore Chapter of the ICSI organized the inaugural function of the 6th Management Skills Orientation Programme (MSOP). CA and CS Shambhu Sharma, Past Chairman, Bangalore Branch of SIRC of the ICAI, Bangalore was the Chief Guest who inaugurated the programme. In his address he shared with the participants his own experience as a professional and encouraged them to strive to excel in their chosen field, keep abreast of the latest developments and also hone their interpersonal skills.
On 12.9.2011 a Career Awareness Programme was conducted for 2nd PUC, Commerce Students of St. Joseph’s School, Bangalore. Nearly 100 students attended the career awareness programme. CS S.C. Sharada, Chapter Treasurer and Sangeetha Flora, Asst. Director of the Chapter were the speakers. Again on 17.9.2011 the Career Awareness Programme was held at BMS Women’s College Bangalore and St. Claret College, Bangalore for final year B.Com students. Nearly 150 students participated in the Career Awareness Programme. CS S.M. Pramod (Past Chairman Bangalore Chapter of the ICSI), Sr. Manager – Secretarial, Tata Tea Global Beverages Limited, Bangalore was the speaker. The speakers explained in detail the course offered by the Institute and the eligibility criteria for the course, examinations, requirements of training etc., the role of Company Secretary and importance of the profession of Company Secretary in the changing economic scenario. They then highlighted the opportunities available to those who complete the Company Secretary ship course. Further they enumerated the emerging areas of practice and the changing role of Company Secretary. They also focused on what would be the mindset and preparation required from a student who wanted to pursue the
On 21.9.2011 at the valedictory function of the MSOP Dr. Rajdeep Manwani, Co-ordinator, Department of Commerce, Jain University Bangalore was the Chief Guest who in his address shared his experience and advised the participants to overcome fear by honing their Knowledge, Skill and Attitude to enrich their minds and unleash their potential. He also motivated students to be themselves and to do good to get recognition which in turn carries talent and takes one to the pinnacles of success. The Chief Guest then distributed the Best Participant award to Sakina Rassawala and prizes for the Best Project to the team comprising Niralee Shah, Neeraj R Varma and Jasbinder Kaur Neela for the Project on “Board Meetings – Video Conference”. He also distributed the Course Completion Certificates to the participants. Sakina Rassawala and Vinay Mohta, Participants, shared their feedback about the MSOP Programme.
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Hyderabad Chapter Fourth Management Skills Orientation Programme (MSOP) On 14.9.2011 the Fourth Management Skills Orientation Programme conducted by the Chapter was inaugurated. CS P. Chiranjeevulu , Chapter Chairman in his welcome address threw light on the importance of MSOP and its effectiveness. He focused on the available opportunities for Company Secretaries. Lastly, he discussed the topics planned and scheduled for the MSOP programme. CS S.S. Marthi, Vice Chairman of SIRC, discussed with the participants the intricacies and practical aspects of the profession. He guided the students and explained how the best could be brought out of the experienced faculties which would ultimately result in overall development and progress of the participants. CS Sudhir Babu, Council Member, the ICSI congratulated the participants of MSOP for successfully completing CS Final. He gave an insight into the role and importance of the profession. Moving further, he aptly spoke about the growing relevance and importance of Corporate Governance and the prominent role of Company Secretaries in the modern world. CS Dinesh Arora, Chief Financial Officer & Company Secretary, Karvy Computer Share (P) Ltd. was the Chief Guest and inaugurated the programme. He warmly welcomed and congratulated all the participants on their success. In his address, he inspired the participants by sharing his journey as a Company Secretary. He shared his views about the profession and unveiled the real role of Company Secretaries. He made all the participants believe that the profession was a challenging one and all would have to think beyond the professional curriculum to bring in real prosperity of the profession and the Corporates as well. The Chairman of the Chapter cheered all the participants at the end and wished them success. He also made a few important announcements about the MSOP and requested the participants to make the best out of it. On 30.9.2011 at the Valedictory Session of the MSOP Dr. G.K. Viswanath, Director , Academic & Planning, JNTUH , Hyderabad was the Chief Guest. CS P. Chiranjeevulu, Chapter Chairman in his welcome address gave a report on MSOP. He advised the participants to join Company secretaries benevolent fund (CSBF) and also advised them to attend the programmes conducted by the Chapter/Institute. The Chief Guest, Dr. G.K. Viswanath in his address advised the participants to acquire knowledge in a structured and continued manner. He stressed the importance of positive attitude, willingness to learn things and possessing good communication skills. He also advised the participants not to confine themselves to be a Company Secretary but to acquire
general managerial and entrepreneurial skills. He impressed upon the participants the need to learn to take ownership of the role and decisions taken on the job. CS C. Sudhir Babu, Council Member, the ICSI and CS SS Marthi, Vice-Chairman, SIRC of the ICSI addressed the participants and wished them all success. CS A. Visweswara Rao, Member, SIRC also graced the occasion. The Chief Guest presented participation certificates to those who attended the programme and Best Participant Award went to Saranya, Best Project Report Award to the team dealt with the topic “Leadership� and its members comprising Saranya, Ashish Kumar Mundada and Srilakshmi. Interactive Meeting on Revised Schedule-VI of the Companies Act, 1956 On 17.9.2011 the Chapter organised an interactive meeting on Revised Schedule-VI of the Companies Act, 1956 at its premises. CS P. Chiranjeevulu, Chapter Chairman in his welcome address informed the importance of the topic. Speaker CS B. Ravi, Chairman, SIRC spoke on various issued relating to recent MCA amendments and also about revised Schedule VI. While speaking on recent MCA amendments, he explained the objective and the purpose of the amendments. He explained to the members the changes in reporting requirements and formats for presentation of the same. It was followed by lively interaction of the participants. Study Circle Meeting on Arbitration as Alternative Dispute Resolution On 28.9.2011 the Chapter organised a Study Circle Meeting on Arbitration as Alternative Dispute Resolution at its premises. CS P. Chiranjeevulu, Chapter Chairman in his welcome address informed about the importance of the topic. G. Mohiuddin, Advocate, High Court of Andhra Pradesh was the speaker. He spoke on definition of Arbitrations, waiver of right to object, extent of judicial interventions, arbitration agreement, interim measures by court, appointment of arbitrators, challenge procedure, Arbitral proceedings and supplementary provisions etc.
WESTERN INDIA REGIONAL COUNCIL WIRC Annual Regional Conference On 26 and 27.8.2011 the Annual Regional Conference of WIRC of the ICSI was held at Pune. The Annual Regional Conference was hosted by Pune Chapter. The Conference was sponsored by AlphaBricks Technologies Private Limited and co-sponsored by Bank of Maharashtra.. Around 300 delegates comprising Practising Company Secretaries and Company Secretaries in Employment from Maharashtra, Gujarat, Madhya Pradesh, Chattisgarh and Goa were present for the Conference. The Conference began with the traditional lighting of the lamp at the hands of the Chief Guest Chandrashekhar Tilak, Executive Vice President, NSDL, CS Makarand Lele, Chairman WIRC
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of the ICSI, CS Sanjay Gupta, Chairman PDC Committee WIRC of the ICSI, CS. Prakash Pandya, Secretary, WIRC, CS Vikas Agarwal, Chairman, Pune Chapter and CS Devendra Deshpande, Secretary, Pune Chapter were present. Welcoming the delegates at the inauguration session, CS Vikas Agarwal, Chairman, Pune Chapter informed that the role of Company Secretary is rapidly expanding. Addressing the gathering, CS Makarand Lele, Chairman, WIRC, informed the important role being played by Company Secretary as Business Managers. Chandrashekhar Tilak, Chief Guest for the Inauguration Session of the Conference, in his address to the delegates, shared his experience and dwelt on the changing business scenario and importance for professionals role to be business managers in addition to compliance caretaker. CS. Prakash Pandya and CS. Sanjay Gupta also addressed the gathering. The inaugural session witnessed release of the souvenir for the conference as well as a publication by WIRC titled LLP Referencer. The winners of Opinion Writing Competition of WIRC, Regional Level Round of All India Moot Court Competitions, Merit List Students from WIRC, Best Article published in the Souvenir and Slogan Writing Competition winners organized by Pune Chapter were felicitated at the hands of Chandrashekhar Tilak. The Conference started with the First Technical Session on the theme Showcase Presentation. CS Subodh Gore, Managing Director, Horbiger India Private Limited, CS Sanjay Pernekar, VP, GPPD Division, Graphite India Limited, CS Subramanian Vutha, Proprietor Subramanian Vutha & Associates, CS Sudhir Thite, Manager, wholesale Finance and Company Secretary, John Deere India Private Limited, CS Anant Govande, Director, Offshore Accounting and Taxation services Private Limited and CS Manoj Singh Bisht, Proprietor MSB and Associates were the eminent faculties for this session. This was followed by a special session by CS Onkar Kothari, Company Secretary & Compliance Officer Liability Claims Manager, Bajaj Allianz General Insurance Company Limited on Mitigating professional Risks and Liabilities. This was followed by a Second Technical Session on Opportunities for Company Secretaries in Corporate Restructuring and Project Management. CS Keyoor Bakshi, Practicing Company Secretary and Ravindra Dnyansagar, Managing Director, Engenous Engineering Private Limited were the faculties for this technical session. The faculties informed the members about the opportunities for both practicing company secretaries as well as company secretaries in employment in corporate restructuring and project management. The first day of the Conference formally concluded with a special session on XBRL wherein Sameer Dadia, Managing Director, AlphaBricks Technologies Private Limited explained
the members about the XBRL and its utilities. The evening of the first day of the Conference witnessed the cultural programs. The Third Technical Session on the Second Day of the Conference was conducted on “Opportunities for Company Secretaries in the field of Personnel Management� by CS. Dinesh Castellino, Vice President Legal & Company Secretary, Cummins India Limited. This was followed by the Fourth Technical Session on the opportunities for Company Secretaries in the field of Finance by Dr. Waman Parkhi, Director, Tax and Regulatory Services, KPMG and in field of Taxation by Shrirang Tambe, Director Ourea Capital advisors. The faculties explained the members about the opportunities for both practicing company secretaries as well as company secretaries in employment in finance and taxation. The fifth and last Technical Session was conducted on Opportunities for Company Secretaries in the field of Risk Management by Anil Bijur, Ex-Banker, Forex and Finance Consultant. The two days Annual Regional Conference concluded with an interaction of the delegates with the Central Council Members of the Institute from the Western India Regional Council where CS S N Ananthasubramanian, CS Umesh Ved and CS Vikas Khare, Central Council Members of ICSI from WIRC interacted and addressed the members. This was followed by the Valedictory Session. Before conclusion CS Makarand Lele, Chairman WIRC gave an overview of the two days Conference.
Pune Chapter 7th Management Skills Orientation Programme (MSOP) From 5.9.2011 to 21.9.2011 the Pune Chapter organized 7th MSOP for Students. There were total 30 students who attended the programme at Pune Chapter. The programme included various presentations like Compliance Certificate, Paper Presentation, Mock meetings etc. as well as few visits to outside agencies like Stock Broker, Stock Exchange etc. Certificates were distributed to the participants on last day of the programme. Interactive Meeting of Members of Pune Chapter with Local Central Council Member and Regional Council Members From Pune A face to face interaction with local Central Council and Regional Council members with the members of ICSI was organized on 15.9.2011 at Hotel Shang- Rila with the following objectives- To note and discuss the top ten goal finalized by the Council for Execution, to discuss and suggest subjects for syllabus review, to note any other suggestions for the Council, to note initiatives of WIRC of ICSI and to note initiatives of Pune Chapter of ICSI.
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ICSI-CCGRT Programme on Derivatives On 23.9.2011 ICSI-Centre for Corporate Governance, Research & Training (CCGRT) conducted a program on Derivatives at its premises in CBD Belapur, Navi Mumbai. The programme was inaugurated by Rajesh Mokashi, Deputy Managing Director of Credit Analysis & Research Ltd. an expert in Credit Rating and is responsible for improvement of International Mutual Fund Rating and CA Ramesh Lakshman of Ramesh Lakshman and Co. having vast experience in Treasury products, International Accounting Standards. Rajesh Mokashi initiated the discussion on derivatives by giving an overview on the subject. He explained that derivative is a financial tool and a hedging tool. Derivatives can reduce the risk through hedging but it also has the power to spread the risk. Warren Buffett addresses derivative as a weapon of mass destruction. Experts blame derivatives for spreading the risk during American Financial crisis in 2008-09. The basic question that every entrepreneur asks is, “How to control the future price”? The answer is “Derivatives”. For e.g. one of the biggest concern of Airline Industry is the rising price of Aviation Turbine Fuel (ATF). In order to solve this problem the Airline Industry can hedge their risk by entering into a future contract (derivatives) to get supply of ATF at a specific price. Here the underlying assumption is that prices will definitely rise in future. But if suddenly the price of ATF starts falling down then the future contract will be more costly than the current market price. This shows that derivative can provide hedge from future price rise but it carries a huge risk. Media has been constantly reporting that bankers sold derivatives to the companies without explaining them the downsides of derivatives. Therefore, RBI has now intervened and is ensuring that there is more transparency and disclosure. Derivatives have more examples of success than failures but one should understand the risk before entering into derivatives market. He concluded by advising company secretaries to ensure that derivatives are disclosed in Balance Sheet to make investors aware of the risk undertaken by the company. CA Ramesh Lakshman the principal speaker on the subject conducted an interesting and lively session on ‘derivatives’ by citing practical examples and showing illustrative videos to enable understanding of technical concepts. He explained the whole concept of derivative in detail. He said that derivatives are reactionary which means that they react according to their principal product. Prices of Derivatives move up or down as per the underlying principal product. There is a one to one association between derivatives and the principal product and this association is very important. A derivative is a financial instrument with all three core characters viz. underlying principal product, less cost as it requires no or very small initial net investment and settlement at a future
date. Financial instruments can be of two types namely shares and bonds. Shares can be further classified as equity futures and equity options and bonds can be classified as bond futures and options on futures. In International foreign exchanges five types of derivatives are traded which are forward, futures, FRA (Forward Rate Agreement), options and swaps. The underlying index can be a share index (index futures or index options) or weather future index. Forwards are known as the fundamental derivatives. Forward contracts are obligatory contracts which help in locking into a position but it comes with credit default consequences. It simply means that a company can decide today, the price at which it wants to buy commodity in future and can enter into a forward contract. If price rises as per the assumption of the company then it will gain from forward contract otherwise it will lose. Forwards are most popular type of derivatives in foreign exchange market. Futures are like forward contracts which are traded on an exchange. Futures are standardised contracts which are subject to initial margin and variation margin and it comes with settlement guarantee. The major difference between the two is that forwards generally are in currencies and futures are available in a wide range of underlying products. Another striking difference is that all future contracts which belong to a specific month expire simultaneously and delivery is mandatory after the specific date. FRA i.e. Forward Rate Agreement is a forward contract on interest rates. Here investors can exercise choice which is considered advantageous. Options are the only financial contract without an obligation. It gives a right to purchase or sell an underlying asset at a specific price or on or up to a specific date without a corresponding obligation to perform the contract. Naturally the options are more costlier than other derivatives. To simplify, in case of options if we fail to perform the contract we don’t have to pay any damages or penalty but we can insist on performance and the other person has to pay the damages and penalty if he doesn’t perform the contract. Swaps are wonderful derivatives. Swaps are like a series of forward contracts which are structured or bundled together. Swaps can be explained as contracts between two counterparties where one party pays on one basis and the other party pays on a different basis. Currency swaps are popular swaps where counterparties pay on basis of different currencies. Similarly there are Interest rate swaps where one party pays as per fixed interest rate and other party pays as per floating interest rate. The other types of swaps are equity swaps, basis swaps and commodity swaps. Different types of derivatives explained above are understood as individual derivatives, but when we need intelligent solution
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ICSI-CCGRT to achieve objectives we can use structured products. The structured products take a plain product or a plain derivative, add one or more derivative(s) and give a new combination of derivatives. The different and popular types of structured products are break forward (forward + option), range accrual (option + option), swaption (swap + option) and dual currency bond (bond + forward). Derivatives can be exchanged or traded OTC i.e. Over The Counter. The Regulatory Authorities for exchange traded derivatives are SEBI (for stocks), RBI (for currencies), FMC (for commodities) and both SEBI & RBI (for bond and interest rates). The exchange traded derivatives are easy to use and they cannot be questioned on legality as they are launched only after regulatory clearance. OTC products are governed by FEMA and RBI as they are foreign exchange related. In conclusion, he made it clear that derivatives must be used, only after understanding the need for using them in terms of suitability, appropriateness, customer appropriateness, consistency with business and responsibility. Company Secretaries must ensure that a proper Board resolution is passed to authorise persons who can enter into a derivative product and different individuals should be authorised to transact in derivatives, to overview the transaction and to sign other agreements. The Board should also specify the limit assigned to persons entering into derivatives contracts. Company Secretary must also ensure that forward and option contracts are evidenced in writing, all FEMA regulations are complied with. He/she must check whether cross currency forwards can be entered into and premium paid for options are clearly mentioned in INR and not as per percentage. Programme on XBRL On 23 and 24.9.2011, ICSI-CCGRT conducted a programme on eXtensible Business Reporting Language (XBRL) at its premises in CBD Belapur, Navi Mumbai. The speakers were S.Swaminathan, Founder and CEO of IRIS Business Services Ltd., Suchita Goyal, Revathy Ramnan who are XBRL Consultant and Brita Gajera who is Tagging Specialist of IRIS Business Services. During the first day session participants got a brief idea about the XBRL. Suchita Goyal started the session by explaining the meaning of XBRL. Each letter in XBRL has an extensive meaning i.e. X stands for extension which allows customisation of concepts, BR stands for business reporting using uniquely defined concepts and L stands for computer understandable language. XBRL is known as the BAR CODE of the business reporting world. There were no Reporting standards in India and a need was felt to introduce a Reporting Standard. Therefore MCA in collaboration with IRIS and ICAI took the efforts to introduce
XBRL which is a Reporting Standard. XBRL (eXtensible Business Reporting Language) is not a new concept and it has been in India since 2005. XBRL is a standard like we have standard sizes of shoes, standard number for spectacle glasses, etc. The benefits of XBRL are accuracy, accessibility, analysis, no rekeying of data, real time data, royalty free, etc. The beneficiaries of XBRL will be all the users in the financial chain like Regulators, Auditors, Corporate Finance and Control Department, Equity and Credit Analysts, Investment Bankers and Investors. Suchitra briefly explained the steps in XBRL, first step is to prepare Taxonomy i.e. Data Definition. Taxonomy literally means, “Science of Classification”. Next step is to prepare Instance Document i.e. Data Creation and Last step is Rendering i.e. Data Consumption. Taxonomy means dictionary of concepts and interrelations. Taxonomy includes schema and linkbases. Schema means definition of concepts and elements and linkbases means interconnections. Different types of Linkbases are Presentation Linkbases, Label Linkbases, Calculation Linkbases, Definition Linkbases, Reference Linkbases, Formula Linkbases. The most important linkbases are Presentation Linkbase and Calculation Linkbase. Instance document includes data specific to individual companies like entity’s information, reporting period, unit of measurement, footnotes, etc. Instance document is cross checked with Taxonomy and any mismatch is alerted. S. Swaminathan informed the participants that XBRL gained importance in India after City Limouzines Case and Satyam’s Case. On 24.9.2011 the morning session was conducted by Revathy Ramnan. MCA mandate is divided into broad headings like Meeting the Mandate, Application of Mandate, MCA taxonomy structure, MCA validation tool. Each broad heading was then explained in detail. Meeting the mandate includes understanding MCA mandate, understanding MCA taxonomy, XBRL instance document, XBRL instance validating tool, submitting the validated file to the MCA. MCA taxonomy structure includes in GAAP, ca and ci. In GAAP provides the schema containing the accounting standards and old schedule VI. Ca included MCA specific elements. Ci stands for commercial and industrial, it picks data from in gaap and ca. specified beta can be used to viewing the taxonomy. The MCA taxonomy was viewed by the participants and lots of queries were asked. MCA validation tool is formed up of XBRL validation tool, XML validation tool and MCA validation tool. All the instance documents prepared around the globe has to pass through XBRL validation tool and XML validation tool. Only Indian companies have to pass through MCA validation tool.
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ICSI-CCGRT Demonstration was shown to the participants of template based tagging tool which can be classified as web based or excel based or desktop based. Web based forms can be accessed from anywhere in the world where there is internet facility. The post lunch session was conducted by Brita Gajera where she gave a demonstration of the software Proton. Proton is a stand alone desktop based tool. It generates XBRL and IXBRL documents and comes with an in built validation tool. The first step in proton is to set up a job i.e. creating a company. All the details required to set up a job were explained. Mapping assistant and three types of tagging i.e. tabular, text block and on document tagging were explained in detail. It was explained that proton is easy to use when we use a dual screen desktop. In proton there is an error grid which shows the errors occurred during tagging. To check how much data is tagged we can use report analysis. Then brief details about XBRL developments in India and Circulars issued by MCA were shared. MCA taxonomy was also explained. In MCA taxonomy there are around 3000 concepts, it is based on Schedule VI and Accounting Standards, there is use of tuples and the current version is designed for Commercial and Industrial Entities. Brief explanation of IN GAAP was also given. Many questions were asked by the participants during the proton video show. S. Swaminathan took the last session where he welcomed more queries from the participants. He explained the different forms of XBRL available in the market and also explained the cost range offered by various vendors. He insisted that XBRL must come with an inbuilt validator, as validation is the most important part of the whole process and then he concluded the session. The participants appreciated the whole session which was very interactive. Programme on New Takeover Code On 1.10.2011, ICSI-CCGRT organized a programme on New Takeover Code at its auditorium in CBD, Belapur, Navi Mumbai. The Chief Guest on the occasion was Neelam Bhardwaj, General Manager, Corporation Finance Department of Securities and Exchange Board of India (SEBI). The speakers for the program were Shailashri Bhaskar, Former DGM, SEBI & a Practising Company Secretary, and Yogesh Chande, Advocate and Partner, Prism Partners, Advocates. Neelam Bharadwaj commenced her address by pointing out that the much awaited SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (New Takeover Code) replacing 1997 Regulations have been notified and will be effective from 23.10.2011. Everyone is now gearing up for the implementation of the new takeover code. Whether it is a success is something which one has to wait and watch. She made it clear that no regulations provide answers for every situation in the entire sphere of economic activity. However,
the new takeover code has tried to address and fill-in all defects and gaps in the 1997 Regulations. She then touched upon certain issues where SEBI has deviated from TRAC recommendations and explained the rationale behind the same. The first one is deviation from the TRAC recommendation of 100% offer size. SEBI decided to keep it at 26% in order to provide limited exit to public and keep up with the equitable framework envisaged in the Takeover Regulations. Also, the offer size shall be 26% of the total shares of the company as on 10th working day from the closure of the tendering period taking into account all convertibles. Given this scenario, allowing complete exit to the competitive bidder would be inequitable as the acquirer then would be indirectly acquiring more than 26% at lower cost. Hence, the mechanism recommended to enable the competing acquirer to sell such shares to the other competing acquirer within certain specified time without triggering further open offer obligations was not accepted by SEBI. However, the size of competitive offer is same as in 1997 Regulations. It is to be noted that persons deemed to be acting in concert with the parties to any underlying agreement shall also be considered as ‘acquirer’ for the purpose of making any open offer under the new takeover code. The acquirer and persons acting in concert with him (PAC) is not allowed to sell shares of the target company held by them, during the offer period (not merely during tendering period) as they cannot be allowed to take an opposite position of buying and selling at the same time. Now the Individual Acquirer Shareholding shall also be considered for determining the Open Offer Trigger Points apart from consolidated promoter shareholding. Public Announcement (PA) in case of preferential issue is required to be made on the date of the shareholder’s meeting in which special resolution for such allotment is passed. As far as exemptions are concerned, only scheduled commercial banks acting as escrow agents are exempted from open offer obligations. Acquisition of shares through rights issue up to entitlement is absolutely exempted while acquisition beyond entitlement is exempted subject to conditions prescribed. Escrow amount has been modified and in case of conditional offer, the escrow amount shall be 50% of total consideration payable or 100% of minimum acceptance whichever is more. She then pointed out that Listing Agreement prescribes no time limit for completion of underlying transactions after closure of offer. Now, the new takeover code prescribes that all underlying transactions of acquisitions shall be completed within 26 weeks from the expiry of offer period. Consequential changes have been made in SEBI (ICDR) Regulations. In respect of disclosures, the 1997 regulations used the term ‘pledge’ but now the new takeover code uses the term ‘encumbrance’ which include a pledge, lien or any such transaction, by whatever name called. Thus, encumbrance is a
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ICSI-CCGRT wider term than pledge and thus requires disclosures across wider area. Apart from the above, fee structure has now been streamlined. She also pointed out that SEBI did not accept the recommendation of TRAC to provide for delisting pursuant to an offer and proportionate acceptance as the acquirer has other options and it is very well under the acquirer’s control to decide acquiring less percentage of shares from the promoter. She also informed that only transaction based disclosures will be effective from 23.10.2011 and other continual disclosures shall become effective from 31.03.2011 and by that time the stock exchanges will revise their formats of disclosure to bring them in line with the new takeover code. She also made it clear that since there are no transitional provisions in the new takeover code, this is the last chance for promoters to increase their holdings before 23.10.2011. Thereafter, they will be required to make PA for open offer when attracted. In conclusion, she dedicated the new 2011 Takeover Regulations to Late C. Achuthan, Chairman of TRAC who had very unfortunately expired just a few days before the new regulations were notified. Shailashri Bhaskar, Practising Company Secretary & Former, Deputy General Manager, Securities and Exchange Board of India (SEBI) made an elaborate presentation supplemented by illustrations on the New Takeover Code with special emphasis on the Role of Company Secretary. She commenced the discussion on the new takeover code by discussing the applicability of new takeover code. It is applicable to direct and indirect acquisitions of listed companies with effect from 23.10.2011. She threw light on certain terms/ definitions which have been modified viz. definition of ‘promoter’ & ‘promoter group’ brought in line with ICDR regulations, definition of ‘control’ modified, ‘specified date’ replaced with ‘identified date’, ‘Frequently traded shares’ defined as shares which have a trading volume of 10% or more of the total number of shares during a period of 12 calendar months preceding the month in which the public announcement is made etc. She pointed out that as a professional, a company secretary may be associated with the acquirer company, target Company or competitive bidder company. Thus, for playing his/her role effectively, he/she needs to thoroughly understand the takeover regulations with particular reference to initial acquisition, creeping acquisition, exemptions, disclosures, open offer process and a competitive bid. The initial threshold for open offer is increased from 15% to 25%. Thus, if acquirer acquires shares which taken together with shares already held is 25% or more, he is required to make PA for an open offer. Similarly, the new limits for creeping acquisition shall be 25% and 75% instead of the existing 15% and 55%. While considering creeping acquisition, no netting off will be allowed which
means only purchases will be considered and not sales. Similarly, in case of preferential allotments, difference between pre-issue share capital and post issue share capital will be treated as additional acquisition and more importantly, individual acquisition will also be considered for purpose of trigger, irrespective of the aggregate holding of group. For example, there is a promoter group of 6 persons and their total holding is 38% of the share capital of target company. A, an individual holding 22% acquires shares and thereby crosses 25% threshold individually. In this case, he will trigger the code and will be required to make an open offer, although the promoter group already holds more than 25%. ‘Direct’ and ‘indirect’ controls have different provisions w.r.t. pricing & timing of open offer and hence both controls have been defined. Acquisition of control with or without acquisition of shares will require and open offer. The exemption from open offer by way of special resolution through Postal Ballot in case of indirect acquisitions has been done away with. Voluntary offers have been introduced subject to certain conditions namely anyone who holds 25% can make a voluntary offer, the one who has acquired any share without triggering the code in the last 52 weeks cannot acquire shares other than in the open offer, those who have made a voluntary open offer cannot acquire shares for 6 months after completion of open offer, except through another voluntary open offer, voluntary offer can be made for a minimum of 10% when holding 25% etc. The minimum size of open offer has been increased from 20% to 26% of the outstanding shares. She then discussed the exemptions under new takeover code subsequent to which if an acquirer acquires the specified percentage of shares or voting rights, he would be exempted from the requirement of making an open offer to the existing shareholders of the company. Exemptions have been streamlined and classified on the basis of the specific charging provision from which exemptions would be available, with conditions for eligibility for such exemptions. It is to be noted that acquisition by operation of section 87(2) of Companies Act, 1956 is explicitly exempted and does not now trigger open offer. Similarly, exemption is granted subject to certain conditions separately under initial trigger limit and creeping limit of 5% if acquisition is pursuant to buyback/rights issue. In all cases which qualify for automatic exemptions, a report has to be filed with Stock Exchange within 4 working days apart from 4 days advance intimation to Stock Exchange. Also, a report has to be filed SEBI within 21 working days. She then explained in brief provision relating to disclosures. Disclosure shall be for the aggregate holding of the promoter and persons acting in concert with him. It shall be given for shares and all securities convertible into equity. Acquirer has to disclose when he acquires 5% or more. Thereafter, he has
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ICSI-CCGRT to disclose within 2 working days every purchase and sale exceeding 2% if he holds 5% shares or voting rights. It is to be noted that shares acquired by encumbrance shall be an acquisition and given on release of encumbrance shall be a disposal. Continual disclosure has to be made by persons holding more than 25% to stock exchange and Target Company within 7 working days of March 31st. Details of pledge are to be disclosed within 7 working days of creation, invocation and revocation or release to the company. Quarterly disclosure of pledge is no longer required.
all important definitions viz. Acquirer, Control, Maximum permissible non-public shareholding, Financial Year, Persons acting in concert, Promoter, Promoter Group, Shares, Target Company etc. along with its legal implications. He threw light on Trigger for compulsory offer, Creeping acquisition limit, Voluntary offer, Offer size, Mode of payment, General exemptions, provision relating to escrow, disclosure requirements etc. He also discussed the obligations of the acquirer and Target Company and other important concepts of offer price, Conditional offers and Competitive offers.
A Company Secretary of acquirer company has to conduct Pre-takeover due diligence of target company, ensure compliance with obligations cast on acquirer company, ensure that all compliance for acquirer is up-to-date, seek disclosure from directors, interested parties etc. In case an open offer is triggered, all requirements relating to PA, DPS, letter of offer, pricing, escrow account, appointment of proposed director representing acquirer on target company along with the timelines needs to be met. A Company Secretary of target company has to co-operate with the acquirer, ensure compliance with obligations of target company and furnish the acquirer with list of shareholders, warrant holders, convertible debenture holders, DR holders etc. He/She has to ensure that the target company except with approval of shareholders obtained after PA, do not during the offer period, sell, transfer, encumber or otherwise dispose or enter into any agreement for sale, transfer, etc. of its assets, otherwise than in the ordinary course of business; or issue or allot any authorised but unissued securities carrying voting rights; or enter into any material contracts. The restrictions are also extended to subsidiaries of Target Company. The target company shall not fix record date for any corporate action 3 days prior to tendering period and till the end of tendering period. More importantly, a committee of independent directors is required to be formed to give opinion on the open offer. After completion of offer, the Company Secretary shall ensure to register the shares in the name of the acquirer. A Company Secretary of competitive bidder company should ensure that competitive offer is made within 15 working days of the original public announcement. In such case, escrow account will be increased. All other provisions shall apply as in normal open offer.
He made it clear that an open offer can be withdrawn only in case of refusal of statutory approval, death of the acquirer (natural person), conditions in the agreement which triggered the offer not being met for reasons outside reasonable control of the acquirer provided these conditions have been disclosed in the detailed public statement and letter of offer and such other circumstances which in opinion of SEBI merits withdrawal. Lastly, he threw light on the documents involved in the takeover process viz. Public Announcement, Detailed public statement, Letter of offer and Post-offer PA and care to be taken while drafting the same.
The Chief Guest and the speaker thereafter responded to all the queries put forth by the participants in this regard. Yogesh Chande threw light on the intricacies of New Takeover Code from practical point of view. He explained in detail the important regulations and discussed the legal aspects involved in it. He commenced by pointing out that the open offers under new takeover code are classified into compulsory and voluntary offers and threw light on the same. He then discussed
Investor Awareness Programmes ICSI - Centre for Corporate Governance, Research & Training (CCGRT) organised a series of Investor Awareness Programmes sponsored by the Ministry of Corporate Affairs during the month of September 2011 and October 2011. On 28.9.2011 ICSI-CCGRT conducted two Investor Awareness Programmes one at Indian Maritime University, Mumbai Campus where K V Ramaswamy, Managing Director, Quadratic Financial Pvt. Ltd addressed the participants in his inimitable humorous style on Understanding Capital Markets and different avenues of investment. Another program on the same day was organised at SIWS College, Wadala. The program was inaugurated by Dr. Gopalakrishnan, Principal, SIWS College and Suresh Thakurdesai, Former Chairman, ICSI-WIRC addressed the participants inter-alia on the functioning of the capital markets different facets of investments. There was excellent floor participation during the programs. Thereafter on 3.10.2011, yet another Investor Awareness Program was held by ICSI-CCGRT at SIES College of Management Studies (SIESCOMS), Nerul. S N V Sivakumar, Director, SIESCOMS introduced the speakers. Ranjith Krishnan, Asst. Education Officer, ICSI-CCGRT gave introductory remarks, explained the theme of the program and spoke on psychological aspects of investments. K V Ramaswamy, Managing Director, Quadratic Financial Pvt. Ltd addressed the participants on various aspects of the capital markets and avenues of investments. There was excellent interactive floor participation.
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SOUTHERN INDIA REGIONAL COUNCIL Eligible for Eight Program Credit hours
6th SOUTHERN INDIA REGIONAL CONFERENCE OF PRACTISING COMPANY SECRETARIES Days and Dates : Friday and Saturday, the 11th and 12th November 2011 Venue : Vijayanagar Hall, Vivanta by Taj, 41/3, M G Road, Bangalore, Karnataka – 560 001
THEME: CS – March towards “Mark of Excellence” TECHNICAL SESSIONS: • Fly with FEMA • Wear to Win and Speak to Lead • Take Over to Over Take • Launching Pad to Unlock Wealth • MCA Initiatives - Panel Discussion Delegate Fees
Rs.
Member of ICSI/ICWAI/ICAI
2800
Non Members
3100
Corporate Members of SIRC of ICSI Professional Programme Members
2500
of Bangalore Chapter Accompanying Spouse
2000
Students of ICSI
1600
(The fee will cover organizational expenses including conference material, coffee/tea and lunch). Delegates registering on or before October 31, 2011 would be eligible for an early bird discount of Rs.300/- on the delegate fees. The delegate fee once paid shall not be refunded in any case. The registration form together with the appropriate delegate fee as above may be sent along with cheque/demand draft drawn in favour of “SIRC OF THE ICSI”, payable at Chennai (if form sent to Chennai ) or Bangalore Chapter of the ICSI (if form is sent to Bangalore or before 5th November 2011) to the following addresses: Southern India Regional Council The Institute of Company Secretaries of India,‘ICSI-SIRC HOUSE’, No. 9, Wheat Crofts Road, Nungambakkam, Chennai – 34 Tel. No. 044-28279898; 28268685 E-mail: siro@icsi.edu
[OR]
Bangalore Chapter of the ICSI, “Sheriff Chambers”, 3rd Floor, Rear Block, 14, Cunningham Road, Bangalore – 560 052 Tel. No. 080-22287158; 22286574 E-mail: bangalore@icsi.edu
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MEMORANDUM OF UNDERSTANDING BETWEEN THE ICSI AND MAICSA This Memorandum of Understanding is made and entered into this 14th day of October 2011 between THE MALAYSIAN INSTITUTE OF CHARTERED SECRETARIES AND ADMINISTRATORS, Bangunan MAICSA, No.57, The Boulevard, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur; hereinafter referred to as ‘MAICSA’ for one part and THE INSTITUTE OF COMPANY SECRETARIES OF INDIA, a statutory body constituted under an Act of Parliament the Company Secretaries Act, 1980 (56 of 1980) and having its headquarters at “ICSI House”, 22, Institutional Area, Lodi Road, New Delhi; hereinafter referred to as ICSI of the other part. ICSI and MAICSA have been working together to strengthen mutual co-operation amongst the two institutes with the broad objective of strengthening the profession of Company Secretaries across the globe. They have been engaged in mutual discussions to achieve the above objective. WHEREAS, to formalize their relationship, both parties hereto agree to enter into this Memorandum of Understanding bearing the following arrangements : 1. Exchange Programme 1.1 MAICSA has established the MAICSA Wings Programme, an exchange programme whereby Graduates of MAICSA make organized visits to other ICSA Divisions and organizations and vice versa. 1.2 The objectives of the Programme are as follows:
To provide opportunities for Graduates of MAICSA to visit other Divisions and organizations and meet and interact with their Graduates, students and members
To provide opportunities of Graduates of other Divisions and organizations to visit MAICSA and meet and interact with MAICSA Graduates, students and members.
To provide Graduates of all Divisions and organizations with the opportunity of gaining some exposure to the work/ learning cultures of other countries.
for a head start in their professional life. 1.3 Both parties agree to jointly participate in the Programme and to promote the objectives of the Programme. 1.4 The Programme shall be extended to students and members of both parties. 1.5 The activities organized for the Programme shall include, but shall not be limited to the following:
Visits to Secretariats of both parties,
Attendance at the training programmes organized by both parties/Divisions
Attendance at social/networking events organized by both the parties Divisions. Visits to offices and work places of members of both parties/Divisions. ‘Organised visits to professional places of interest e.g. Companies, Commissions, Stock Exchanges, Securities Commissions etc.
Organised visits to institutions of higher learning which have strong links with both parties/Divisions.
Sight seeing tours
Any other related activity as may be mutually agreed
1.6 Both parties shall endeavour to seek sponsorship to help defray the costs of participation in the Programme by their students and members. 2. Exchange of Journals/Other Publications 2.1 Both parties agree to regularly exchange journals/other publications published by them on a complimentary basis, with liberty to reproduce in each other’s publications such portion which may be of interest to their members, with prior permission of the other party and subject to acknowledging the source. 1663
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MEMORANDUM OF UNDERSTANDING BETWEEN THE ICSI AND MAICSA
2.2 Both parties also agree to: 2.2.1 Exchange course materials, case studies, research publications and other academic and research inputs; 2.2.2 Undertake joint research projects which are mutually beneficial; 2.2.3 Any other matter of mutual interest in the areas such as Corporate Law, Management, Corporate Governance, International Laws etc. 3. Special Provisions 3.1 This Memorandum of Understanding places no financial obligations on either of the parties. 3.2 Nothing shall diminish the full autonomy of either party, nor should any constraints be imposed by either in carrying out this understanding 3.3 This Memorandum of Understanding is not intended to be legally binding. It merely expresses the intentions and understanding of the parties. 4. Duration 4.1 This Memorandum of Understanding shall be in force from the date on which it is signed and shall be effective for a duration of five (5) years thereto and may be renewed upon agreement by both parties. 4.2 Any modifications concerning this Memorandum of Understanding may only be made by mutual consent in writing by both parties. 4.3 Either party may terminate this Memorandum of Understanding at any time by giving six (6) months notice in writing to the other party although such action will only be taken after mutual consultation in order to avoid any inconveniences. The parties shall continue to fulfill their obligations hereunder until all on going programmes or activities at the time of termination have concluded. ICSI and MAICSA agree to constitute a Joint Standing Committee which will meet as often as necessary for overseeing the implementation of the MOU. The Joint Committee will consist of(a) The President and the Chief Executive of MAICSA or their nominees (b) The President and the Secretary & CEO of ICSI or their nominees Approved by Council of ICSI at its 197th meeting held on 15th December, 2010 & by Government of India vide its letter dated 21st September, 2011 and by Council of MAICSA at its meeting held on 30th November 2009. This Memorandum of Understanding has been duly executed this day and year.
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THE INSTITUTE OF COMPANY SECRETARIES OF INDIA In pursuit of Professional Excellence “Statutory Body under an Act of Parliament” NOTIFICATION New Delhi, the 17th October, 2011 ICSI No. 1 of October, 2011.– The Council of the Institute of Company Secretaries of India pursuant to the Company Secretaries Act, 1980, as amended by the Company Secretaries (Amendment) Act, 2006 has issued the following Guidelines for Peer Review of Attestation Services by the Practising Company Secretaries, namely:1. Introduction The Company Secretaries Act, 1980 (the Act) was enacted to make provision for the regulation and development of the profession of Company Secretaries, the Institute of Company Secretaries of India set up under the said Act has been conducting examinations and prescribing standards for adherence by its members. The concept of whole-time practice, which gained its initial recognition in 1988, has gained momentum after the enactment of the Companies (Amendment) Act, 2000 which required Compliance Certificate to be issued by Practising Company Secretary for certain size of companies. Our members in practice arc also being recognised for issuing certificates under various laws. Excellence is the hallmark of success in a competitive environment. The performance can be judged and enhanced to that level of excellence only by evaluation by a competent professional. The Council of the Institute, therefore, decided to introduce Peer Review for Practising Company Secretaries to periodically review the PCS firms and evaluate the quality, sufficiency of systems, procedures and practices, so that excellence in their performance is maintained. The Council of the Institute has been constituted under the Company Secretaries Act, 1980 for discharging the functions assigned to the Institute under the Act. Section 15 of the Act provides that “the duties of carrying out the provisions of this Act 1665
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shall be vested in the Council” and enumerates various duties of the Council. With a view to regulate the profession of Company Secretaries and in terms of the powers vested, the Council is thus authorised to issue these guidelines for Peer Review. These guidelines serve as a mechanism intended to further enhance the quality of professional work of Practising Company Secretaries over a period of time, thereby ensuring that the profession of Company Secretaries continues to serve the society in the manner envisaged. 2. Objectives 2.1 The main objective of Peer Review is to ensure that in carrying out their attestation services and professional assignments, the PCS (a) comply with the Technical Standards laid down by the Institute and (b) have in place proper systems (including documentation systems) for maintaining the quality of the attestation services work they perform. The Council has specified in these guidelines for Peer Review, the Technical Standards in relation to which peer review is to be carried out. Peer review does not seek to redefine the scope and authority of the Technical Standards specified by the Council but seeks to enforce them within the parameters prescribed by the Technical Standards. 2.2 Peer Review is directed towards maintenance as well as enhancement of quality of attestation services and to provide guidance to members to improve-their performance and adhere to various statutory and other regulatory requirements. Essentially, through a review of attestation services engagement records, peer review identifies the areas where a practising member may require guidance in improving the quality of his performance and adherence to various requirements as per applicable technical Standards. 2.3 These guidelines provide a framework of the Peer Review process and the requirements of what is expected of a member during the conduct of a peer review. 2.4 These guidelines may be called the “Guidelines for Peer Review of Attestation Services by Practising Company Secretaries”. 2.5 These guidelines shall be applicable w.e.f. 1st October. 2011. 3 . Key Definitions - For the purpose of these guidelines, 3.1 Attestation Services - Means services involving the secretarial audit issuing of various certificates, but does not include: Management consulting Engagement; Representing a client before the Authorities; Testifying as expert witness; and Providing expert opinion on points of principle, such as secretarial standards or the applicability of certain laws, on the basis of facts provided by the client, The phrase ‘Attestation Services’ is used in these guidelines interchangeably with secretarial or compliance audit Services, Attestation Functions and secretarial audit functions. 3.2 Member - Means a member of the Institute of Company Secretaries of India. 3.3 Practice Unit - Means members in practice, whether practicing individually or a firm of Company Secretaries. 3.4 Peer Review - Means an examination and review of the systems, procedures and practices to determine whether they have been put in place by the practice unit for ensuring the quality of attestation services as envisaged and implied/ mandated by the Technical Standards and whether these were effective or not during the period under review. 3.5 Peer Review Board - Means a Board established by the Council in terms of these Guidelines to conduct peer review. The expression “Peer Review Board” is hereinafter referred to as “Board”. 3.6 Regulator - Means Government or any regulatory body constituted by the Parliament or State Legislature who is/are empowered to regulate the Acts which include various attestation services which the Council may, from time to time, prescribe to cover as attestation services for the purpose of peer review. 3.7 Reviewer - Means any member engaged to carry out peer review of practice unit from the panel of reviewers. 3.8 Technical Standards - Mean and include: Secretarial Standards issued by the Institute of Company Secretaries of India, wherever mandatory; Guidance Notes on Secretarial Standards issued by the Institute of Company Secretaries of India; Compliance of the Guidance Notes issued by the Institute of Company Secretaries of India;
Notifications/Directions issued by the Council of Institute of Company Secretaries of India; and 1666
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Compliance of the provisions of the various relevant Statutes and/or Regulations, which are applicable in the context of the specific engagements being reviewed.
3.9 Qualified Assistant - means a person assisting the reviewer for carrying out peer review, who is a member of the Institute and has undergone adequate training in the manner considered appropriate by the Board in terms of clause 15.1 of the Guidelines. 3.10 Words and expressions used and not defined in these guidelines shall have the meanings assigned to them under the Company Secretaries Act, 1980 and the Company Secretaries Regulations, 1982 framed thereunder. 4. Authority of the Guidelines on Peer Review 4.1 The guidelines on Peer Review shall apply to all or any of the following cases : (a) Whenever a peer review is mandated (b) Whenever a peer review is requested (c) Whenever peer review is conducted. 4.2 The Guidelines on Peer Review are issued in relation to conduct of members in attestation services;
to promulgate an appropriate mechanism for ensuring the quality of attestation services and guide the members to conduct themselves in a manner that the Council considers appropriate;
to provide guidance in relation to the statutory powers and obligations with respect to the parties involved in peer review;
to prescribe the scope of peer review and the procedures to be adopted during the conduct of a peer review: and
to establish the expected conduct of members during a peer review.
5. Powers of the Council
To constitute the Board and to fill in the vacancies arising in the Board from time to time.
To decide upon, from time to time, the Technical Standards the implementation of which fall within the purview of the peer review process.
To refer such matters to the Board as the Council may deem fit.
6. Peer Review Board 6.1 Establishment and Appointment (1) The Board shall be established by the Council. (2) The Board shall consist of a maximum of seven members to be appointed by the Council, of whom at least four shall be from amongst the Members of the Council. (3) The balance members of the Board shall be drawn from amongst prominent members of high integrity and reputation, including but not limited to former public officials, regulatory authorities etc. (4) The Council shall appoint the Chairman and the Vice-Chairman from amongst the Members of the Council. (5) At least one-half of Council Members on the Board shall hold Certificate of Practice. (6) The tenure of the Peer Review Board shall be co-terminus with the tenure of the Council and the term of a member shall be for such period as may be prescribed by the Council. (7) Any vacancy(ies) on the Board shall be filled in by the Council. (8) Members of the Disciplinary Committee of the Institute of Company Secretaries of India shall not concurrently serve on the Board. 6.2 Meetings (1) No business shall be transacted at a meeting of the Board unless there are present at least three members, including the Chairman or in his absence, the Vice-Chairman, (2) If there is no quorum within half an hour of the time fixed for the meeting, the meeting shall stand adjourned to a date, time and place fixed by the Chairman or in his absence, the Vice-Chairman. 1667
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(3) The Board shall meet not less than four times in a year. 6.3 Reporting The Board shall submit proceedings of the meeting of the Board within 30 days from the date of the meeting to the Council. 7. Scope of Peer Review 7.1 The peer review process is directed at the attestation services of a practice unit. (1) Once a practice unit is selected for review, its attestation engagement records pertaining to the immediately preceding financial year shall be subjected to review. Provided that the records of attestation services relating to years prior to the financial year beginning 1.04.2004 shall not be subjected to review. (2) The Review shall focus on: (i) Compliance with Technical Standards. (ii) Quality of Reporting. (iii) Office systems and procedures with regard to compliance of attestation services systems and procedures. (iv) Training Programs for staff (including apprentices) concerned with attestation functions, including appropriate infrastructure. 8. Powers of the Board 8.1 The duty of carrying out the provisions of these guidelines shall be vested in the Board. 8.2 In particular, and without prejudice to the generality, of the foregoing powers, the duties of the Board shall include: (1) To call for information from practice units in such form as it deem fit. (2) To maintain a panel of Reviewers. (3) To define the terms of appointment of the reviewers. (4) To send a Panel of at least three reviewers (from the Board’s own panel) to the practice unit and allow the practice unit to choose any one reviewer from the panel so forwarded to it: Provided that in case the practice unit would like to have reviewers from another State/Region (and undertakes to bear the extra costs that would be incurred for TA/DA etc.) and none of the reviewers as identified by the Board for the practice unit are from outside the place of business of the practice unit, then the practice unit may make a special request to the Board to provide names of reviewers from outside the State/Region where the practice unit has his place of business. (5) To examine the aspects of basis of selection of records pertaining to the attestation services in terms of the appropriate Technical Standards. (6) To arrange for such training programs for reviewers as may be deemed appropriate; (7) To prescribe the system, practice and procedure to be observed in relation to peer reviews; and (8) On considering the Report of a reviewer, to do any or all of the following: (a) To issue recommendations to the practice unit; (b) To order a further peer review to be carried out: (9) After considering the report of the reviewer and compliance of recommendations by the Practice Unit, wherever deemed appropriate by the Board, to issue Peer Review Certificate. (10) To guide the members on best practices on peer review. 8.3 Where deemed appropriate, after the conclusion of a cycle of reviews or at the end of each such period as may be determined, the Board shall have the powers to make a Special Report to the Council on: (i) General issues regarding the level of implementation and adherence to Technical Standards amongst practice units. (ii) Its own suggestions for further improvement in quality of attestation services. 8.4 The Board may perform any other thing or act as may be incidental to, or which it considers necessary or expedient for the performance of its functions, or exercise of its powers as delegated to it by the Council, including the formation of subcommittees and regional benches of the Board for specific tasks.
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9. Compliance with Peer Review Guidelines 9.1 Practice units are required to comply with the provisions of these guidelines. Practice units failing in this regard will be required to undergo appropriate review of their quality controls by the Board in terms of such specific directions as may be given to it by the Council in these regards from time to time, and as intimated to the members 10. Qualifications of the Reviewer 10.1 The nature and complexity of peer review require the exercise of professional judgement. Accordingly, an individual serving as a reviewer shall:(a) Be a member; (b) Possess at least ten years experience; and (c) Be currently in the practice as Company Secretary in Practice. 10.2 The Board may examine the quality of the report and shall have powers to remove the reviewer from the panel of reviewers in case the quality of the review/report fails to match the desired standards. 11. Members/ Firms Subject to Review 11.1 Peer review will be implemented on the basis of random selections from the practice units or at the request of practice unit. 11.2 If company/concern requests the Board for the conduct of peer review of its secretarial auditor (practice unit), the Board shall take due cognizance of such request and in that case the cost of the peer review shall be borne by such company/ concern. 11.3 If Council / Government or any regulatory body requests the Board for conduct of peer review of any Practice Units, the Board shall take due cognizance of such request and in that case the cost of peer review shall be borne by the referred practice unit. 11.4 The Peer Review Board may alter/change/modify the above method of selection with prior approval of the Council. 12. Obligations of the Practice Unit 12.1 Provisions of access to any record or document to a reviewer: (1) Any person to whom this clause applies and who is reasonably believed by a reviewer to have in his possession or under his control any record or other document, which contains or is likely to contain information relevant to the peer review shall: (i) Produce to the reviewer or afford him access to any record or document specified by the reviewer or any other record or document which is of a class or description so specified, and which is in his possession or under his control/being in either case a record or other document which the reviewer reasonably believes is or may be relevant to the peer review, within such time as the reviewer may reasonably require: (ii) If so required by the reviewer, afford and provide to him such explanation or further particulars in respect of anything produced in compliance with a requirement under sub clause (i) above, as the reviewer shall specify; and (iii) Provide to the reviewer all assistance in connection with peer review which he is expected to provide. (2) Where any information or matter relevant to a practice unit is recorded otherwise than in a legible form, the practice unit shall provide and present to the reviewer a reproduction of any such information or matter, or of the relevant part or it in a legible form, with a suitable translation in English if the matter is in any other language, and such translation is requested for by the reviewer. (3) The practice unit shall ensure that the reviewer is given access to all documents relevant to his review no matter which office of the practice unit these documents may be available in, in case the practice unit has more than one office. (4) A practice unit shall allow the reviewer to inspect, examine or take any abstract of or extract from a record or document or copy therefrom which may be required by the reviewer. 12.2 For the purpose of this clause a person means a Partner/ Sole Proprietor of the practice unit to which the particular review relates or any person employed by or whose services are engaged by such unit. 1669
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13. Periodicity of Peer Review 13.1 The peer review of every practice unit should be mandatorily carried out at least once in a block of five years. However, if the Board so decides or otherwise at the request of the practice unit, the peer reviews for a practice unit can be conducted at shorter intervals. 14. Cost of Peer Review 14.1 The cost of Peer Review for reviewer and his qualified assistant(s) as may be decided by the Board from time to time, shall be borne by the Practice unit. In case reviewer has to conduct second review, the same rate would apply to the second review also. Each of the branch/ office under review would be considered separately. 15. Training and Development 15.1 To ensure that the objective of peer review is attained in letter and spirit, adequate training facilities shall be provided, from time to time, to the Reviewer(s) and other persons who assist the Board as and when and in the manner considered appropriate by the Board. Reviewers shall be expected to be fully familiar with all procedures, prescriptions, guidelines and other decisions as may be issued by the Board from time to time. 16. Review Framework 16.1 Essentially, a peer review entails a review of attestation engagement records and related financial/other statements to ascertain that the practice unit is adhering to Technical Standards. Where a practice unit is not following Technical Standards in certain situations, suggestions and recommendations for improvement may be made, and possibly followed by a further review, in keeping with the primary thrust of peer review. 16.2 The methodological approach involved in peer review can be defined in terms of three stages viz. planning, execution and reporting, which are summarized below; (i) Planning .
Intimation - A practice unit will be intimated in writing about an impending peer review and will be sent a Questionnaire for completion together with a panel of three suggested names of reviewers. The practice unit will have to give its choice of reviewer within a period of 15 days from the day of receipt of the panel sent by the Board.
Return of completed Questionnaire - The practice unit shall have to complete and return the Questionnaire to the reviewer within one month of receipt. The information will be used for the planning of the review. In addition, practice units will be required to enclose a complete list of their attestation services clients, and to provide any other information the reviewer considers necessary to facilitate the selection of a sample of attestation services engagements, representative of the practice unit’s client portfolio, for review.
(ii) Sample of Attestation services Engagements (a) from the complete attestation services client list, an initial sample will be selected by the reviewer. Practice units will be intimated of the selection in writing about two weeks in advance, requesting the relevant records of the selected attestation services clients to be made available for review. (b) At the execution stage, the initial sample may be reduced to a smaller actual sample for review. However, if the reviewer considers that the actual sample does not cover a fair cross-section of the practice unit’s attestation services engagements, he may make further selections. (iii) Confirmation of visit In consultation with the practice unit date(s) will be set for the on-site review to be carried out. Flexibility will be permitted to ensure that members arc not inconvenienced at especially busy periods. The on-site review date(s) will be arranged by mutual consent such that the review is concluded within sixty days of intimation. (i) Peer review visits will be conducted at the practice unit’s head office or other officially noted/recorded place of office. The complete on-site review-of a practice unit may take at least a full day depending upon the size of the practice unit. This is based on the assumption that the practice unit concerned has made all the necessary information and documentation available to the reviewer for his review. However, in any case this on-site review should not extend beyond three working days. 1670
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(ii) Initial meeting An initial meeting will be held between the reviewer and a partner/ sole proprietor of the practice unit designated to deal with the review (designated partner). The primary purpose of this meeting is to confirm the accuracy of the responses given in the Questionnaire. The description of the system in the Questionnaire may not fully explain all the relevant procedures and policies adopted by the practice unit and this initial meeting can provide additional information. The reviewer should have a full understanding of the system and be able to form a preliminary evaluation of its adequacy at the conclusion of the meeting. (iii) Compliance Review-General Controls (a) The reviewer may carry out a compliance review of the General Controls and evaluate the degree of reliance to be placed upon them. The degree of reliance will, ultimately, affect the attestation services engagements to be reviewed. The following five key controls will be considered as General Controls: Independence Maintenance of Professional Skills and standards Outside Consultation Staff Supervision and Development Office Administration Practice units arc expected to address each of the five key control areas. (b) In each key control area there shall be supplementary questions and matters to consider. These are intended to ensure that the kind of controls that are expected to be maintained, are installed and operated within practice units. (c) All questions in the questionnaire may not necessarily be relevant to particular types of practice units because of the size and culture etc. However, practice units should still assess their internal control systems to ascertain whether they address the objectives under the five key control areas. (iv) Selection of attestation services engagements to be reviewed (a) The number of attestation services engagements to be reviewed depends upon: The number of practicing members involved in attestation services engagements in the practice unit; The degree of reliance placed, if any, on general quality controls; and
The total number of attestation services engagements undertaken by the practice units for the period under review.
(b) The engagements reviewed should be a balanced sample from a variety of different types of companies. Accordingly, if the reviewer considers that the actual sample is not representative of the practice unit’s attestation services client portfolio, he-may make further selections from the initial sample or from the complete attestation services client list. (v) Review of records The reviewer may adopt a compliance approach or substantive approach or a combination of both in the review of attestation services engagement records. (a) Compliance approach-Attestation services Engagements
The compliance approach is to assess whether proper control procedures have been established by the practice unit to ensure that attestation services are being performed in accordance with Technical Standards.
Practice units should have procedures and documentation sufficient to cover each of the key areas. Members in smaller practices may find some of the documentation too elaborate for most of their clients and so should tailor their attestation services documentation to suit their particular circumstances with justification for doing so provided to the reviewer.
(b) Substantive approach-Attestation services Engagements A substantive approach will be employed if the reviewer chooses not to place reliance on the practice unit’s specific controls on attestation engagements or is of the opinion that the standard of compliance is not satisfactory. This approach requires a review of the attestation working papers in order, to establish whether the attestation work has been carried out as per norms of Technical Standards. 1671
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16.3 Reporting (i) Preliminary Report of Reviewer At the end of an on-site review, the reviewer shall, before making his report to the Board, communicate a preliminary report to the practice unit. The reviewer shall report on the areas where systems and procedures had been found to be deficient or where he has noticed non-compliance with reference to any other matter. The reviewer shall not name any individual in his reports. The practice unit shall have 21 days beginning the day after the day the preliminary report is received, by the practice unit from the reviewer to make any submissions or representations, in writing to the reviewer, concerning the preliminary report. (ii) Interim Report of Reviewer (a) If the reviewer is satisfied with the reply received from the practice unit, he shall submit an appropriate Report to the Board. In case the reviewer is not satisfied with the reply of the practice unit, the reviewer shall accordingly submit his Interim Report to the Board. (b) In pursuance of the provisions contained in the above clause or on receipt of a request from the practice unit, the Board may instruct the reviewer to - again carry out the review after six months to verify that systems and procedures have been streamlined and accordingly, on being satisfied, submit a report to the Board. (c) On receiving a report from a reviewer in terms of these, the Board, having regard to the Report and any submissions or representations attached to it, may: make recommendations to the practice unit concerned regarding the application by it of Technical Standards; if it is of the opinion that (1) In case the review is related to a firm, any one or more or all of the partners in the firm may have failed to observe, maintain or apply, as the case may be, Technical Standards; (2) In ease the review is related to a member practicing on his own account, the member may have failed to observe, maintain or apply, as the case may be, Technical Standards; Then; (3) Issue instructions to the reviewer to carry out, within such period as may be specified in the instructions (which period shall not commence earlier than six months after the date on which the instruction is issued), a further peer review as regards the practice unit to which the report relates; and (4) Specify in the instruction, the matters as regards which the review is to be carried out; (d) The Board will make recommendations to the practice unit where: Based on the report of the reviewer, it appears that the practice unit has satisfied all key control objectives, which the Board has determined and/or prescribed in respect of maintenance of/ adherence to Technical Standards but where further improvements could be made to internal quality control systems; and Based on the report of the reviewer, it appears that the practice unit has satisfied the major key control objectives but some weaknesses exist in others. The practice unit is expected to consider the recommendations for rectifying the weaknesses thus identified and informed by the Board and take all necessary actions to ensure that all key control areas are addressed. (e) A follow up review will be required where the practice unit has not satisfied the Board that all the key control objectives have been maintained and where, in the view of the Board the deficiencies are likely to materially affect the overall quality of an attestation services engagement of the practice unit. In such cases the Board will also make recommendations, which it expects the practice unit to implement in order to ensure the maintenance of Technical Standards. The implementation of these recommendations will be examined during the follow up review. (f) In case the reviewer is not satisfied even at the subsequent review, he shall submit his Report to the Board incorporating his reasons for dissatisfaction. (iii) final Report of Reviewer (a) The reviewer will prepare a final Report to the Board (the Reviewer’s Report), incorporating the findings as discussed with the practice unit. The final report will be examined/inspected by the Board in terms of the degree of compliance 1672
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with the Technical Standards by the reviewed practice unit. The model forms of such final Reports shall be communicated to the reviewer by the Board. (b) The Board shall consider the reviewer’s final report and the practice unit’s submissions. Thereafter, the Board may issue recommendations, if considered appropriate, to the practice unit and/or instruct the Reviewer to perform any follow-up action. The Board may, if deemed fit, then issue Peer Review Certificate to the practice unit. (iv) The reviewer shall not communicate any Report(s) unless the examination of such Report(s) and related records has been made by him or by a partner or an employee of his firm. 17. Referral of Disputes and Appeal 17.1 Where a dispute arises over the powers of reviewers or the process or conclusions reached after the review or to any other matter related to the review, the practice unit, the reviewer or both may refer the dispute, in writing, to the Board. Such referral shall have to be made within two months in such manner as may be prescribed by the Board in these regards. 17.2 Where a dispute is referred, after considering any submissions or representations (which shall be made in writing) made by the relevant practice unit and/or the relevant reviewer, the Board Shall decide the dispute within six months and communicate such decision to each of the parties to the dispute; May issue directions relating to the matter in dispute to such practice unit or the reviewer concerned and require such unit or reviewer to comply with them; Shall convey its decision in these regards to the appellant within 15 days from the date of the decision, so as to provide the appellant sufficient time to respond. 17.3 Where a practice unit is dissatisfied with the decision of the Board, it may refer the matter to the Council within two months in such manner as may be prescribed. 18. Immunity 18.1 A practice unit, which makes available records or documents to a reviewer, shall not incur any liability under the Code of Conduct under the Company Secretaries Act, 1980 and the Regulations framed thereunder, by reason of compliance with these Guidelines on Peer Review . 18.2 The reviewer, by virtue of carrying out the peer review shall not incur any liability other than the liability arising out of his own conduct under the Code of Conduct under the Company Secretaries Act, 1980 and Regulations framed thereunder as well as under the relevant clauses of these Guidelines. 18.3 The members of the Peer Review Board shall not incur any liability by virtue of their having discharged the responsibilities as given in these Guidelines and/or as may in future be specified by the Council, other than the liability arising out of their own conduct under the Code of Conduct under the Company Secretaries Act, 1980 and Regulations framed thereunder as well as under the relevant clauses of these Guidelines. 19. Confidentiality 19.1 Strict confidentiality provisions shall apply to all those involved in the peer review process, namely, reviewers, members of the Board, the Council, or any person who assists any of these parties. 19.2 Those persons subject to the secrecy provision: (1) Shall at all times after his/ their appointment preserve and aid-in preserving secrecy with regard to any matter coming to his/ their knowledge in the performance or in assisting in the performance of any function, directly or indirectly related to the process and conduct of peer review. (2) Shall not at any time communicate any such matter to any other person; and (3) Shall not at any time permit any other person to have any access to any record, document or any other material if any form which is in his/their possession or under his/their control by virtue of his/their being or having been so appointed or his/their having performed or having assisted any other person in the performance of such a function. 19.3 Non-compliance with the secrecy provisions in the above clause shall amount to professional misconduct as defined under Section 22 of the Company Secretaries Act, 1980. 19.4 A statement of confidentiality (appended as Annexure ‘A’) shall be filled in by the persons who are responsible for the conduct of peer review i.e., reviewers/ the members of the Board and others who assist them. 1673
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20. Procedural Departures 20.1 Where the persons who are responsible for the conduct of peer review (reviewers, the members of the Board and others who assist them) have not followed the prescribed procedures, they shall have to justify significant departures and such justification shall have to be mandatorily made known to the Council in the periodic Reports of the Board to the Council. Annexure ‘A’ Statement of Confidentiality [In accordance with the Guidelines on Peer Reviews this statement of confidentiality is to be filled in by the persons who are responsible for the conduct of peer review i.e. reviewers, members of the Board and others who assist them, individually. The Reviewer shall be responsible for taking this undertaking from all those persons who assist him or are likely to assist him in conducting peer reviews, and shall send the same to the Board. This statement of Confidentiality should be renewed every year.] To The Chairman, Peer Review Board, The Institute of Company Secretaries of India Sir, I hereby declare that my attention has been drawn to the need for confidentiality in the conduct of peer reviews. 1 therefore undertake and assure that in so far as any or all of the following relate to me or are brought to my knowledge/attention, in any manner whatsoever, whensoever, I will ensure that on my part [ ] Working papers shall always be kept securely so that unauthorised access is not gained by anyone. [ ] The practice unit’s attestation services procedures shall not be disclosed to third parties. [ ] Any information with regard to any matter coming to my knowledge in the performance or in assisting in the performance of any function during the conduct of peer reviews shall not be disclosed to any person. Access to any record, document or any other material, in any form which is in my possession, or under my control, by virtue of my being or having been so appointed or my having performed or having assisted any other person in the performance of such a function, shall not at any time be permitted to any other person. I understand that any breach of the provisions regarding confidential information contained in the Guidelines on Peer Review will be considered as gross negligence and, subject to investigation, will result in appropriate action. Signature: Name: Designation: Date: Place: Taken on record on (date) By Signature: Name: Designation: By Order of the Council of the Institute of Company Secretaries of India N.K. JAIN, Secy. & CEO [ADVT. 111/4/121 /11 /Exty.]
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Briefs of professional or other misconduct cases filed against the members in which the Disciplinary Committee of the Institute has found them guilty and has decided to remove their names from the Register of Members vide its Orders dated 3rd October, 2011 1. Complaint of professional or other misconduct against Ms. Sunita Khandelwal, ACS- 20444 (C.P. No.7483). The Institute had received a complaint against Ms. Sunita Khandelwal, alleging that she has not exercised due diligence while certifying Form 2. The Disciplinary Committee after considering the report of the Director (Discipline), oral and written submissions made by the parties, other material available on record and the admission of Ms. Sunita Khandelwal, came to the conclusion that Ms. Sunita Khandelwal was ‘Guilty’ of professional misconduct under clause (7) of part I of the Second Schedule of the Company Secretaries Act, 1980 as she had certified the Form No. 2 without verifying the receipt of money by the company from the books of accounts of the company and without verifying the relevant Board resolution of the Company. The Disciplinary Committee after providing the opportunity of hearing to the member decided to remove name of Ms. Sunita Khandelwal from the Register of Members of the Institute for a period of 60 (sixty) days. The period of removal of name is from 11th October, 2011 to 9th December, 2011. 2. Complaint of professional or other misconduct against Shri Hari Varanasi, FCS- 3552 (C.P No.8244). The Institute had received a complaint against Shri Hari Varanasi alleging that he had not exercised due diligence while certifying two Form No. 32. The Disciplinary Committee after considering the report of the Director (Discipline), submissions made by the parties, other material on record and the circumstances came to the conclusion that Shri Hari Varanasi was ‘Guilty’ of professional misconduct under clause (7) of Part I of the Second Schedule of the Company Secretaries Act, 1980 as he had certified two Form No. 32 without relying on the resolution passed by the Board of Directors at the duly convened meeting and further he had not ensured whether the Director who had signed the Form No. 32 was duly authorized to file the said Form No. 32. The Disciplinary Committee after providing the opportunity of hearing to the member decided to remove the name of Shri Hari Varanasi from the Register of Members of the Institute for a period of 60 (sixty) days. The period of removal of name is from 11th October, 2011 to 9th December, 2011. 3. Complaint of professional or other misconduct against Shri K K Gupta, FCS-2371 (C.P.No.3258). The Institute had received a complaint against Shri K K Gupta alleging that he was holding Certificate of practice while being in employment which is in contravention of the resolution passed by the Council of the Institute. The Disciplinary Committee after considering the Report of the Director (Discipline), submissions made by the parties, other material on record and the circumstances, came to the conclusion that Shri K K Gupta was ‘Guilty’ of professional misconduct under clause (1) of Part II of the Second Schedule of the Company Secretaries Act, 1980, as he had violated the resolution dated the 12th May, 1991, passed by the Council prohibiting the members holding Certificate of Practice to accept the employment; and was also ‘Guilty’ of professional misconduct under clause (2) of Part III of the First Schedule of the Company Secretaries Act, 1980, as he did not supply the information sought by the Committee. The Disciplinary Committee proceeded ex-parte and decided to remove the name of Shri K K Gupta from the Register of Members of the Institute for a period of 120 (One Hundred and Twenty) days. The period of removal of name is from 11th October, 2011 to 7th February, 2012. 4. Complaint of professional or other misconduct against Shri Rahul Saini, ACS-16716 (C.P.No.7009). The Institute had received a complaint against Shri Rahul Saini alleging that the he had not exercised due diligence while certifying two Form No. 32. The Disciplinary Committee after considering the report of the Director (Discipline), submissions made by the parties, other material on record and the circumstances, came to the conclusion that Shri Rahul Saini was ‘Guilty’ of professional misconduct under clause (7) of Part I of the Second Schedule of the Company Secretaries Act, 1980 as he had certified Form No. 32, without exercising due diligence and was also ‘Guilty’ of professional misconduct under clause (2) of Part III of the First Schedule of the Company Secretaries Act, 1980, as he failed to appear before the Disciplinary Committee. The Disciplinary Committee proceeded ex-parte and decided to remove the name of Shri Rahul Saini from the Register of Members of the Institute for a period of 90 (Ninety) days. 1675
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The period of removal of name is from 11th October, 2011 to 8th January, 2012. 5. Complaint of professional or other misconduct against Shri Praveen Kumar Tiwary, ACS-21443 (C.P. No. 8084). The Institute had received a complaint against Shri Praveen Kumar Tiwary alleging that the he had not exercised due diligence while certifying two Form No. 18. The Disciplinary Committee after considering the oral and written submissions made by the parties in the matter and other material available on record came to the conclusion that Shri Praveen Kumar Tiwary was ‘Guilty’ of professional misconduct under clause (7) of Part I of the Second Schedule of the Company Secretaries Act, 1980 as he had certified Form No. 18 on the basis of the order of the Company Law Board. The said order of the Company Law Board was not relevant. The Disciplinary Committee after providing the opportunity of hearing to the member decided to remove the name of Shri Praveen Kumar Tiwary from the Register of Members of the Institute for a period of 60 (sixty) days. The period of removal of name is from 11th October, 2011 to 9th December, 2011.
COMPANY SECRETARIES BENEVOLENT FUND HOW TO BECOME THE LIFE MEMBER Application for life membership of CSBF has to be submitted in the prescribed Form-A (available on the website of the Institute i.e. www.icsi.edu) and should be accompanied by Demand Draft or Cheque (payable at par) for Rs. 5,000/- drawn in favour of “Company Secretaries Benevolent Fund” payable at New Delhi and the same can be deposited in the offices of any of the Regional Councils located at Delhi, Kolkata, Chennai and Mumbai. However for immediate action, the applications should be sent to The Secretary & CEO, The Institute of Company Secretaries of India, 22, Institutional Area, Lodi Road, New Delhi-110 003. The members can also apply online. For further information/clarification please contact Mrs. Meenakshi Gupta, Joint Director or Mr. J.S.N. Murthy, Administrative Officer on telephone No.011-45341047 / 45341049, mobile No. 9868128682 or through e-mail Ids csbf@icsi.edu or member@icsi.edu. Following benefits are presently provided by the CSBF: Financial Assistance in the event of Death of a member of CSBF:-
Other benefits subject to the Guidelines approved by the Managing Committee from time to time:-
Upto the age of 60 years
Group Life Insurance Policy for a sum of Rs. 2,00,000; and
Upto Rs. 1,00,000 in deserving cases on receipt of request subject to the Guidelines approved by the Managing Committee from time to time.
Reimbursement of Medical Expenses
Upto Rs. 40,000
Financial Assistance for Children’s Education (one time)
Upto Rs. 10,000 per child (maximum for two children) in case of the member leaving behind minor children.
Above the age of 60 years
Upto Rs. 1,00,000 in deserving cases on receipt of request subject to the Guidelines approved by the Managing Committee from time to time.
THE MANAGING COMMITTEE OF THE COMPANY SECRETARIES BENEVOLENT FUND (CSBF) IN ITS MEETING HELD ON 29TH SEPTEMBER 2011 HAS DECIDED TO INCREASE THE FINANCIAL ASSISTANCE FROM Rs. 3.00 LAKHS TO Rs.5.00 LAKHS TO THE NOMINEE(S) OF THE DECEASED MEMBERS OF THE FUND UPTO THE AGE OF 60 YEARS (W.E.F. 1ST APRIL 2012). THE COMMITTEE HAS ALSO DECIDED TO INCREASE THE LIFE MEMBERSHIP SUBSCRIPTION FOR ENROLMENT AS A MEMBER FROM Rs. 5,000 TO Rs. 7,500 W.E.F. 1ST APRIL, 2012. THE MEMBERS WHO ARE NOT THE MEMBERS OF THE CSBF ARE REQUESTED TO BECOME THE MEMBERS OF THE FUND. FOR FURTHER DETAILS PLEASE VISIT: www.icsi.edu/csbf
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PROCEEDINGS OF 39TH NATIONAL CONVENTION OF COMPANY SECRETARIES HELD ON OCTOBER 13-15, 2011 AT JAYPEE PALACE HOTEL & CONVENTION CENTRE, AGRA The 39th National Convention of Company Secretaries was successfully organised on October 13-15, 2011 at Jaypee Palace Hotel and Convention Centre, Agra on the theme ‘Corporate Dynamism & Innovative Professionalism’. The presence of impressive number of delegates from different parts of country and sister professional bodies abroad made the convention a memorable event. OPENING PLENARY
right perspective and attitude to respond to dynamic business environment to become innovative professional. He talked about making blue ocean strategies to make the competition irrelevant and also about reverse innovation, adapting existing solution using low cost technology etc. He advised the Company Secretaries not to benchmark themselves with their competitors because it limits their competency to go beyond that level, and also to explore new areas and to create new markets for themselves.
His Excellency B L Joshi, Hon’ble Governor of Uttar Pradesh was the Chief guest and Amit K. Sen, Managing Director, East India Pharmaceuticals Ltd. was the Key Note speaker. Anil Murarka, President, the ICSI delivered the Presidential address, Nesar Ahmad, Vice President, the ICSI introduced the theme, Harish K Vaid, Council Member the ICSI and Chairman, Convention organising Sub-Committee delivered the Welcome address, Ranjeet Pandey, Chairman, NIRC of the ICSI introduced the dignitaries and N K Jain, Secretary & CEO made the concluding remarks and proposed a Vote of thanks.
Anil Murarka, President, the ICSI said in his Presidential address that the Convention theme is interesting and relevant in the context of change, growth, competition and advised the professionals to convert problems into resources for which he emphasized that determination, willingness, devotion of time are essential.
B L Joshi, Hon’ble Governor of Uttar Pradesh said in his inaugural address that the Company Secretaries are innovative cross functional professionals. While highlighting the changing role of Company Secretary, he spoke at length about transparency, disclosure, ethics, inclusive growth and sustainable business model through innovation. He said that the enthusiasm that is being shown by the Company Secretaries shows their commitment towards growth.
Harish K Vaid, Council Member, The ICSI Chairman, Convention Organizing Sub Committee in his welcome address reiterated that the time assumes sharp discontinuity as the speed of change intensifies and that demands creative and innovative skills for sustainability and excellence in any field. In this context he emphasized the importance of cross functional excellence and innovation.
While appreciating ‘DNA of Integrity’ a book published by the ICSI, Hon’ble Governor said that it applies to not only Company Secretaries but to all peoples of society as well. He further said that in the new era of systematic innovation it is important for the professionals to be cross functionally excellent and stressed on the importance of adaptability that would help to respond to changes without being paralysed with fear and uncertainty. While concluding, he advised the Company Secretaries to keep their upward move constantly, contest the challenging situations and adhere to professional values and ethics. Amit K. Sen, Managing Director, East India Pharmaceuticals Ltd. in his key note address felt the need for developing a
Nesar Ahmad, Vice President, the ICSI while introducing the theme of the Convention, referred to the next level economic reforms and the strength of Indian economy and emphasised on the importance of innovative professionalism.
N K Jain Secretary & CEO in his concluding remarks emphasized on the desire for innovation. He said a successful or would be successful individual has a much greater desire for success compared to his fear of failure. In fact, desire has been identified as the first ingredient for success in any endeavour. While giving corporate examples for innovation, he said that innovation is required by professional services firms too. While proposing a vote of thanks, he expressed his sincere thanks and gratitude to His Excellency for gracing the occasion as Chief Guest despite hectic schedule. N K Jain also expressed his sincere gratitude and thanks to Lady Governor for gracing the Opening Plenary with her benign presence. He expressed his sincere thanks to Key Note speaker for acceding to the request. He complimented the NIRC and Chapters for winning
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PROCEEDINGS OF 39TH NATIONAL CONVENTION OF COMPANY SECRETARIES the Awards and also the prize winning students for their outstanding performance. He also expressed sincere thanks to dignitaries, invitees and delegates for gracing the Opening Plenary.
of India Ltd. were the guest speakers. Ashok Pareek, Council Member, the ICSI introduced the Chairman and Guest Speakers and Sanjay Grover, Council Member, the ICSI proposed a vote of thanks.
Earlier, Ranjeet Pandey Chairman of NIRC of the ICSI introduced the dignitaries on the dais.
Dr. R C Vaish spoke about electronic revolution and its impact on the business. He said that business and industry has facilitated the electronic transformation and the degree and magnitude of change that takes place in business environment necessitate the regulatory environment to adjust with such change. While speaking on response time being critical with respect to the speed of the change, he emphasized on the concept of value that is required for the professionals.
TECHNICAL SESSIONS PANEL DISCUSSION - DYNAMIC BUSINESS ENVIRONMENT, INNOVATION AND RISK MANAGEMENT Panel Discussion on Dynamic Business Environment, Innovation and Risk Management was addressed by P K Choudhury, Vice Chairman & Group CEO, ICRA Limited and Pasupathi Kumar, ERS Director, Deloitte & Touche Assurance and Enterprise Risk Services India Private Limited. S N Ananthasubramanian, Council Member, the ICSI introduced the panelists and C Sudhir Babu Council Member, the ICSI proposed a vote of thanks. P K Choudhury spoke about business environment and its linkage to innovation and risk management. He said that risk management is a learning process that propels innovation. Referring to various studies conducted, he spoke about the success factors that influence the innovation and risk management. He deliberated at length on culture of accountability, culture of learning, culture of decision making etc., as success factors for innovation and risk management. The innovation and risk management are complementary to each other, he concluded.
Anantha Baruah spoke about global perspective to business environment, convergence in capital market etc. Referring to “passporting” by regulators that enables one regulator to passport any document to other regulators provided it satisfies international standards, he deliberated at length about uniform KYC norms, uniform credit rating symbols, reciprocal regulatory recognitions, etc. Vijaya Sampath discussed in detail the drivers of effective policy and law, need for regulatory convergence, multiplicity of laws and regulatory overlaps, regional concerns vs. nationalistic ambitions, etc. While speaking about technology for business, technology tools for Company Secretaries, benefits of technology, constraints and challenges, etc., she referred to the impact of social media like face book, twitter on business operations.
Pasupathi Kumar spoke about innovation and risk intelligence. While giving corporate examples on response to innovations, he referred to innovation in compliance management. While speaking about three tier compliance framework viz identification, monitoring and reporting, he also deliberated on risk intelligent enterprise, risk governance, risk infrastructure etc. He also deliberated on various principles of risk management and steps to risk intelligence governance, cautioned that if we do not see the risk as an opportunity then it results in opportunity loss.
K Hari spoke about expanded capital market in terms of number of trading members, number of investors, number of trades, average time for clearing, etc. over the last decade. He also spoke about disaster recovery site at NSE which is activated in real time during disasters, if any. He highlighted on T+2 trading cycle, online mobile etc. being the result of regulatory convergence due to technology. Referring to the fact that many listed companies filing their shareholding pattern in electronic platform, he also deliberated on SME listing and advised the Company Secretaries to bring budding SMEs under capital market platform.
SECOND TECHNICAL SESSION - REGULATORY CONVERGENCE, TECHNOLOGY AND INNOVATIVE PROFESSIONALISM
THIRD TECHNICAL SESSION FROM COMPLIANCES TO CREATIVE SOLUTIONS - VISION 2020 CHALLENGES
The Second Technical Session on “Regulatory Convergence, technology and Innovative Professionalism” was chaired by Dr. R C Vaish, Leading Management Consultant. Mr. Anantha Barua, Executive Director, SEBI, Vijaya Sampath, Advisor to Chairman and Group CEO, Bharti Enterprises Ltd. and K Hari, Vice President, National Stock Exchange
The Third Technical Session on “From Compliances to Creative Solutions - Vision 2020 Challenges’ was Chaired by Arun Balakrishnan, Council Member, The ICSI and Former Chairman & MD, HPCL. Ravi Kastia, Group & Executive President & Business Head, Aditya Birla Group and Keyoor Bakshi, Past President, the ICSI, and Practising Company
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PROCEEDINGS OF 39TH NATIONAL CONVENTION OF COMPANY SECRETARIES Secretary were the guest speakers. Umesh Ved, Council Member, the ICSI introduced the Chairman and Guest Speakers and M Gopalkrishna Hegde, Council Member, the ICSI proposed a vote of thanks. Arun Balakrishnan in his opening observations referring to the vision statement of ICSA, London and the changing phases of ICSA, advised the Company Secretaries to be a custodian of corporate governance, as they hold the role as strategic partner to CEO and change agents to corporates. Ravi Kastia elaborated on the process involved in drafting of ICSI Vision 2020 such as stakeholder survey, environmental scan, expectations of stakeholders, resource audit, challenges of the profession, thrust areas etc. He discussed in detail the quality of professional services, role of Company Secretary as corporate manager or corporate advisor and value addition in services.
industries to global revenue discussed in detail about GATT, GATS, Negotiations in Services sector, modes of supply of services, progressive liberalization, transparency, principle of non discrimination and offensive/defensive/balancing interest in the mechanism of negotiation. Dr. Chiah Foo Seong in his presentation said that there should be change in the mindset of professionals to extend their services globally. He deliberated at length about networking, collaborative schemes, cross border partnerships, etc. and emphasized on skill based training for expertise. ICSI-MAICSA MOU SIGNING CEREMONY
Keyoor Bakshi in his opening observations said that involvement of professionals in achieving the vision is a must. Referring Company Secretaries as versatile professionals he emphasized on the integration of practicing professionals and professionals in employment. The mind set of the professionals has to be changed that would make them a versatile one, he observed and emphasized on the role of senior professionals in training of the prospective professionals.
The Institute signed Memorandum of Understanding with Malaysian Institute of Chartered Secretaries & Administrators, (MAICSA) aimed at exchange programme for students and members of respective professional bodies, besides the training programmes, exchange of course material, undertaking joint research projects, etc. The MOU was signed by Anil Murarka, President, The ICSI and Dr. Chiah Foo Seong, President, Malaysian Institute of Chartered Secretaries & Administrators, (MAICSA) in the presence of Nesar Ahmad, Vice President, The ICSI, N K Jain, Secretary & CEO, the ICSI and Peter Lim Thiam Kee, Deputy President, Malaysian Institute of Chartered Secretaries & Administrators, (MAICSA)
FOURTH TECHNICAL SESSION - LEVERAGING GLOBALISATION FOR TRADE IN PROFESSIONAL SERVICES
FIFTH TECHNICAL SESSION - HARMONISATION OF COMPANIES BILL VIS-À-VIS OTHER CORPORATE LAWS
The fourth technical session on “Leveraging Globalisation for Trade in Professional Services” was Chaired by U K Chaudhary, Pas President, The ICSI and Senior Advocate, Supreme Court and Dr. Madhukar Sinha, Professor, Centre for WTO Studies, Indian Institute of Foreign Trade and Dr. Chiah Foo Seong, President, Malaysian Institute of Chartered Secretaries & Administrators, (MAICSA) were the Guest Speakers. R Sridharan, Council Member, the ICSI introduced the Chairman and Guest Speakers and Atul H Mehta, Council Member, the ICSI proposed a vote of thanks.
The fifth technical session on Harmonisation of Companies Bill vis-à-vis other Corporate Laws was addressed by R Sankaraiah, Executive Director- Finance, Jubiliant Life Sciences Ltd. and Ashok Chhabra, Advocate, Mumbai. Pradeep K Mittal, Council Member, the ICSI introduced the Guest Speakers and Vikas Y Khare, Council Member, the ICSI proposed a vote of thanks.
U K Chaudhary in his opening observations advised the Company Secretaries not to restrict their services to corporate legal services. While speaking about global thinking and rendering of services beyond territories, he said outstanding skills and expertise, dedication and commitment to the profession and sense of consolidation/unification is essential ingredient of success in globalization of professional services. He also emphasized on the importance of professional honesty and integrity. Madhukar Sinha while highlighting the contribution of service
R Sankaraiah deliberated at length on company law reform process in India and recent initiatives by Ministry of Corporate Affairs. He welcomed changes such as payment of managerial remuneration without Central Government approval, Video conferencing etc. He also discussed the provisions such as restrictions on acceptance of deposits, prohibition of issue of shares with differential voting rights as obstacles. While speaking about the need for harmonization he spoke about provisions already harmonized and provisions requiring harmonization. In this regard he deliberated on certain conflicting provisions in listing agreement, accounting standards, IFRS, XBRL, Companies Act, 1956 vis-à-vis the Companies Bill. While concluding he identified systematic
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PROCEEDINGS OF 39TH NATIONAL CONVENTION OF COMPANY SECRETARIES approach, business friendly approach, principled development, greater shareholder democracy, etc. as the way forward. Ashok Chhabra in his opening remarks explained about harmonization challenges in the context of integration of global economies. He discussed provisions where the harmonization is required and about certain provisions where harmonization is not required. He referred to provisions of listing agreement, SEBI (ICDR) Regulations etc. where harmonization is required and the certain provisions under SEBI (Insider Trading) Regulations, etc. where harmonization is not really required. CLOSING PLENARY Arun Jaitley, Hon’ble Member of Parliament and Leader of Opposition in Rajya Sabha was the Chief Guest and Justice Dilip Raosahib Deshmukh, Chairman, Company Law Board was the Guest of Honour at the Closing Plenary. Anil Murarka, President, the ICSI delivered the Presidential address, Nesar Ahmad, Vice President, the ICSI introduced the dignitaries, Harish K. Vaid, Council Member, The ICSI and Chairman, Convention Organising Sub Committee delivered the Welcome Address and N K Jain, Secretary & CEO, the ICSI made concluding remarks and proposed a vote of thanks. Arun Jaitley in his address emphaised on need for “Ethical businesses that provide safer roads to compete internationally”. He explained that ethical business and innovative professionalism are closely related. Speaking on the evolving role of Company Secretaries, he said as global consolidation takes place, the professionals like Company Secretaries have to increase their expertise and diversify their areas of practice. While speaking about the stages of changes in business environment over several decades and the impact of technology on business over last two decades, he said that the competition is no longer domestic but it is global and stressed on the importance of cost reduction to attract more clients internationally. He also deliberated on building of capabilities and expertise by business and services to attract more foreign investments, the amount of growth of service sector over several decades, innovation in various sectors over a period of time, etc. Justice Dilip Raosahib Deshmukh in his address said that “Corporate Governance practices are sine-qua-non for corporate dynamism and innovative professionalism. He said Company Secretaries play a key role in guiding and shaping the distinct corporate entities and this enable them to be a professional manager and keep them in high pedestal. While referring to Companies Bill which places the Company Secretaries under the definition of key managerial personnel,
he emphasized on need for ensuring transparency, continuous nurturing of corporate governance practices, application of best management practices, compliance of law in letter and spirit, effective management and distribution of wealth, sustainable development of all stakeholders. He advised the practicing Company Secretaries to shoulder additional responsibilities in providing independent value added services and that the Institute should inculcate strong commitment towards ethical and governance practices amongst its members. Earlier, Anil Murarka in his Presidential Address said that the impact and intensity of creativity and innovation can extend to any heights. The impact of innovation is faster than the dynamism. When learning becomes faster than change, the success is inevitable, observed Anil Murarka and concluded that the change, creativity and innovation being part of a virtuous cycle, follow each other. Mr. Nesar Ahmad, Vice President, the ICSI introduced the dignitaries. Harish K. Vaid, while delivering the Welcome Address said that the globalisation is here to stay, connecting everything and everyone and allowing the best ideas, talent and investments to flow where they can create the most value. This is best done through engagement, not exclusion. It is not a question of winners and losers, but of identifying and building on competitive advantages. CONCLUDING REMARKS AND VOTE OF THANKS N K Jain, Secretary and Chief Executive Officer, the ICSI while providing a brief summary of deliberations at various technical sessions, said that Innovation involves more than just great ideas. We need faith, hard work and a laser sharp focus for the end result to keep persisting for our vision in the face of roadblocks. We tend to see the end result of a creative idea in awe, but what we don’t see are the actions, hard work and persistence behind the scene to make the vision a reality. He encouraged to be open to new ideas and solutions without setting limiting beliefs. While proposing a vote of thanks to dignitaries, N K Jain expressed his sincere thanks and gratitude to Arun Jaitley, Hon’ble Member of Parliament and Leader of Opposition in Rajya Sabha for sparing his valuable time to be the Chief Guest at the Closing Plenary and sharing his vast reservoir of knowledge. He expressed his sincere thanks to Justice Dilip Raosahib Deshmukh, Chairman, Company Law Board for gracing the Closing Plenary as guest of honour and guiding the profession of Company Secretaries with his wisdom and experience.
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PROCEEDINGS OF 39TH NATIONAL CONVENTION OF COMPANY SECRETARIES He expressed his heartfelt thanks to all Delegates, whose useful contributions, in the form of healthy discussions, made the event a great learning experience and foreign delegates for evincing interest in the programmes and activities of the Institute. He placed on record his gratitude and thanks to the Chairmen and Guest Speakers, for excellent discussions of the chosen topics, and participants for fruitful interactions. N K Jain expressed his gratitude to Anil Murarka, President, Nesar Ahmed, Vice President, Harisk K Vaid, Council Member, the ICSI, Chairman, Convention Organising Committee and all Council Members for their advice and support in the successful organisation of the Convention. He expressed sincere thanks to Members of Northern India Regional Council headed by Ranjeet Pandey and special appreciation to the Management Team of Agra Chapter headed by Anju Jain and Management Team of Lucknow Chapter headed by Amit Gupta, for their commitment, toil and efforts in making the Convention a resounding success. He expressed his gratitude to Past Presidents, Past Council Members, Past Secretary Chairmen and Council Members of NIRC, WIRC, EIRC and SIRC for their unstinted support. He also thanked sponsors, advertisers, Management Team of Jaypee Palace Hotel and Convention Centre, Agra for their support. He also appreciated Team ICSI for their impressive performance to make the convention a grand success. Interactive Session As in the past, an Interactive Session was convened for the members with a view to invite their suggestions for further development and growth of the profession. Several issues of importance to the profession figured during discussion and President clarified them appropriately. Release of Institute’s Publications
OTHER HIGHLIGHTS CULTURAL PROGRAMME Lively cultural evening with the performance by Aryans – The Rock Band was organised on October 13, 2011 and performance by Jay Shree Ram Lila Kendra, a dance group from Mathura was organised on October 14, 2011 SPECIAL ARRANGEMENT FOR KARWA CHAUTH Special arrangements such as mehndi, bangles and early morning breakfast were made for female delegates/spouses on the occasion of Karwa Chauth. Visit to Taj Mahal A visit to Taj Mahal was organised for delegates, spouses and children during the Convention. BEST REGIONAL COUNCIL AWARD AND CHAPTER AWARD Best Regional Council, Best National Chapter and Grade wise Best Chapter Awards for the year 2009 and 2010 were presented at the Opening Plenary as under : For the Year 2009 BEST REGIONAL COUNCIL Northern India Regional Council BEST CHAPTERS Sl. No.
Category
Name of the Chapters
1.
National Best Chapter
HYDERABAD
2.
Grade A
PUNE
3.
Grade B
COIMBATORE
4.
Grade C
MYSORE
5.
Grade D
RANCHI For the Year 2010
The following new publications of the Institute were released during the National Convention : 1. Convention Souvenir 2. Guidance Note on Code of Conduct for Company Secretaries (3rd Edition) 3. Referencer on XBRL 4. Referencer on Peer Review 5. Referencer on e-forms 6. Revised SS-2 on General Meetings 7. Guidance Note on Non-Financial Disclosures (Revised) 8. Book on Delisting of Equity Shares (2nd Edition) 9. 40 Years of Chartered Secretary on CD ROM
BEST REGIONAL COUNCIL Northern India Regional Council BEST CHAPTERS Sl. No.
Category
Name of the Chapters
1.
National Best Chapter
HYDERABAD
2.
Grade A
PUNE
3.
Grade B
COIMBATORE
4.
Grade C
BHUBANESWAR
5.
Grade D
MANGALORE
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COMPANY SECRETARIES BENEVOLENT FUND Donations received from members during the Months from May to October, 2011 Sl. No.
Name of the Donor
Membership No.
Amount of donation (Rs.)
1
M/s. JIL Information Technology Ltd. (Arranged by Mr. Harish K. Vaid)
-
6,00,000
2.
Mr. Mahendra C. Bhuta
FCS-1750
15,000
3.
M/s. Mehta Hurkat & Associates (Arranged by Mr. Manoj R. Hurkat)
-
11,000
4.
Mr. Manish Gupta
FCS-5123
5,100
5.
Mr. Ranjeet Pandey
FCS-5922
5,100
6.
Mr. Sanjeeva Narayan
ACS-7304
5,000
7.
Ms. Abha Mittal
Faculty - NIRC
2,100
8.
Mr. Pankaj Kumar
Faculty - NIRC
2,100
9.
Mr. Parmendra K. Mishra
Faculty - NIRC
2,100
10.
Ms. Preeti Jagrota
Faculty - NIRC
2,100
11.
Mr. Rakesh Kumar Khosla
Faculty - NIRC
2,100
12.
Mr. Ravish Bhateja
Faculty - NIRC
2,100
13.
Mr. S. Narayanan
Faculty - NIRC
2,100
14.
Mr. Sharan Shankar Dixit
Faculty - NIRC
2,100
15.
Mr. Suchitta Koley
FCS-1647
2,100
16.
Mr. Sutanu Sinha
FCS-3976
2,100
17.
Ms. Tanya
Faculty - NIRC
2,100
18.
Mr. Y. Saidayya
Faculty - NIRC
2,100
19.
Mr. D.P. Gupta
FCS-2411
1,100
20.
Mr. Rupesh Agarwal
ACS-16302
1,100
21.
Mr. Ayyaswamy Rengarajan
ACS-12274
1,000
Donations received for the family of Late Jayanta Kumar Mohapatra, ACS-20064 Sl. No.
Name of the Member
Membership No.
Amount of donation (Rs.)
1.
Mr. Vijay Kumar Chandak
ACS-10447
11,000
2.
Mr. Harish K. Vaid
FCS-1431
10,000
3.
Mr. Ashok Soni
ACS -19139
5,000
4.
Mr. Hitesh D. Buch
FCS-3145
2,500
5.
Mr. Umesh H. Ved
FCS-4411
2,500
Donations received for the family of Late Satyam Ghosh, ACS-28488 Sl. No.
Name of the Member
Membership No.
Amount of donation (Rs.)
1.
Mr. Ashok Kumar Pareek
FCS- 4539
21,000
2.
Mr. Hitesh D. Buch
FCS-3145
2,500
3.
Mr. Umesh H. Ved
FCS-4411
2,500
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ANNUAL MEMBERSHIP AND CERTIFICATE OF PRACTICE FEES FOR 2011-12 The names of members who could not remit their annual membership fee for the year 2011-12 by the last extended date i.e. 31st August, 2011 stand removed from the Register of Members w.e.f. 1st September, 2011. They may pay the fee and get their names restored by making an application in Form ‘BB’ with the entrance fee (Associate members Rs. 1500/- & Fellow members Rs. 1000/- respectively) alongwith restoration fee of Rs. 250/. Form-BB is available on the web-site of the Institute and also published else where in this issue. The Certificate of Practice of the members who could not remit their annual Certificate of Practice fee for the year 2011-12 by the specified date i.e. on or before 30th September, 2011 stand cancelled w.e.f. 1st October, 2011. They may restore their Certificate of Practice by making an application in Form ‘D‘ with the restoration fee of Rs. 250/-. Form-D is available on the web-site of the Institute and also published else where in this issue. The membership and Certificate of Practice fee is as follows:1.
Annual Associate Membership fee
Rs. 1125/-
2.
Annual Fellow Membership fee
Rs. 1500/-
3.
Annual Certificate of Practice fee
Rs. 1000/-(*)
For queries, if any, the members may please contact Mr. D.D. Garg, Desk Officer and/or Mrs. Vanitha Dhanesh, Assistant on telephone nos. 45341062/64 or on mobile no. 9868128682 or through e-mail id’s at dd.garg@icsi.edu, cp@icsi.edu or member@icsi.edu MODE OF REMITTANCE OF FEE The fee can be remitted by way of : (i)
On-Line [through payment Gateway of the Institute’s web-site (www.icsi.in)].
(ii)
Credit card at the Institute’s Headquarter at Lodi Road, New Delhi or Regional Offices located at Kolkata, New Delhi, Chennai and Mumbai.
(iii)
Cash/ local cheque drawn in favour of ‘The Institute of Company Secretaries of India’, payable at New Delhi at the Institute’s Headquarter or Regional/ Chapter Offices located at Kolkata, New Delhi, Chennai, Mumbai and Chandigarh, Jaipur, Bangalore, Hyderabad, Ahmedabad, Pune respectively. Out Station cheques will not be accepted. However, at par cheques will be accepted.
(iv)
Demand draft / Pay order drawn in favour of ‘The Institute of Company Secretaries of India’, payable at New Delhi (indicating on the reverse name and membership number).
For queries, if any, the members may please contact the Membership Section on telephone No. 011-45341047 or Mobile No.9868128682 / through e-mail ids: annualfee@icsi.edu, member@icsi.edu
ACCEPTANCE OF ANNUAL MEMBERSHIP FEE IN ADVANCE Scheme for accepting the Annual Membership fee in advance from members within and outside India for a period of three years. 1. Advance fee would be accepted for a period of three years only. Members desirous of availing this facility are, therefore, advised to calculate the advance fees, based on the fee/ rates for the time being in force. 2. The advance amount received by the Institute would not be adjustable for any other fees due, such as amount payable at the time of enrolment as fellow, grant of Certificate of Practice afresh/ renewal after a gap etc. The members would be required to pay such fee separately while submitting the prescribed application form(s) etc. for the purpose. 3. Payment of advance fees is only a facility to members and that it would in no manner mean that because of the advance payment of fees their membership is secured upto the relevant year(s). In spite of the advance payment of fees, continuance or otherwise of their membership would be subject to the provisions of the Company Secretaries Act and the Rules and Regulations framed thereunder. 4. In case the advance lying to credit of the member’s account falls short of subsequent year’s fee requirement, it would be the responsibility of the member to send the requisite amount as advance or balance of membership fee for the subsequent year. 5. Refund of advance fee received would not be allowed under any circumstances except in case of removal of the name of a member from the Register of Members under the provisions of the Company Secretaries Act, 1980, the Company Secretaries Regulations, 1982 and the Rules framed thereunder. 6. In the case of death, the fee for the year in which deletion of the name takes place would be deducted and the balance of the advance fee paid, if any, would be refunded to nominee(s)/ legal heir(s) of the member concerned. In all other cases, the balance of advance fee, after such a deduction as aforesaid, if any, would be kept to the credit of the member concerned for adjustment towards annual membership fee payable at the time of restoration. 7. Interest on the advance fee would not be payable at all. 8. In case of members residing abroad payment of advance fee should be made in Indian currency i.e. the draft/ cheque drawn on the designated Indian branch for credit to the account of the Institute. However, where the fee has been sent in foreign currency, conversion of foreign currency would be at the rate applicable on the date when the Institute bankers give credit.
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APPLICATION FOR THE ISSUE/RENEWAL/RESTORATION* OF CERTIFICATE OF PRACTICE See Reg. 10, 13 & 14
FORM – D
To The Secretary to the Council of The Institute of Company Secretaries of India ‘ICSI HOUSE’, 22, Institutional Area, Lodi Road, New Delhi - 110 003 Sir, I furnish below my particulars (i) Membership Number FCS/ACS (ii) Name in full (in block letters) (iii) Date of Birth (iv) Professional Address
: ...................................................................................................................................................... : ...................................................................................................................................................... Surname Middle Name Name : ...................................................................................................................................................... : ...................................................................................................................................................... ...................................................................................................................................................... ...................................................................................................................................................... (v) Phone Nos. (Resi.) : ............................................................... (Off.) : .................................................................. (vi) Mobile No. : ............................................................... Email Id : .................................................................. (vii) Additions to or change in qualifications, if any : ...............................................................................................................................
1.
Submitted for (tick whichever is applicable) : (a) Issue ................................................. (b) Renewal ............................................
2.
(c) Restoration ...........................................
(a) Particulars of Certificate of Practice issued / surrendered/Cancelled earlier Sl. No.
Certificate of Practice No.
Date of issue of CP
Date of surrender/cancellation of CP
1. 2. 3.
(i) I state that I am/shall be engaged in the profession of Company Secretary only on whole-time basis and not in any other profession, business, occupation or employment. I am not enrolled as an Advocate on the rolls of any Bar Council and do not hold certificate of practice from any professional body including ICAI and the ICWAI. (ii) I state that as and when I cease to be in practice, I shall duly inform the Council and shall surrender forthwith the certificate of practice as required by the Company Secretaries Act, 1980, and the regulations made there under, as amended from time to time. (iii) I hereby undertake that, I shall adhere to the mandatory ceiling of not more than eighty companies in aggregate in a calendar year in terms of the Guidelines for Issuing Compliance Certificate and Signing of Annual Return issued by the Institute on 27th November, 2007. (iv) I state that I have issued/did not issue ................................ advertisements during the year 20… - ...................... in accordance with the Guidelines for Advertisement by Company Secretary in Practice issued by the Institute*. (v) I state that I issued .................................... Corporate Governance compliance certificates under Clause 49 of the listing agreement during the year 20…… - … * (vi) I state that I have/have not undertaken … … … Audits under Section 55A of the Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996 during the year 20… - … * (vii) I state that I have/have not maintained a register of attestation/certification services rendered by me/my firm in accordance with the Guidelines for Requirement of Maintenance of a Register of Attestation/Certification Services Rendered by Practising Company Secretary/Firm of Practising Company Secretaries issued by the Institute. *
4.
I send herewith Bank draft drawn on … … … … … … Bank … … … … … Branch bearing No. … … … … for Rs. … … … … towards annual certificate of practice fee for the year ending 31st March … … ……….
5.
I further declare that the particulars furnished above are true and correct. Yours faithfully, (Signature)
Place :
Encl.
Date :
* Applicable in case of renewal or restoration of Certificate of Practice
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APPLICATION FOR RESTORATION OF MEMBERSHIP (Reg. 13)
FORM – BB
To The Secretary to the Council of The Institute of Company Secretaries of India ICSI House, 22, Institutional Area Lodi Road, New Delhi-110 003 Sir, I hereby apply for restoration of my name in the Register as an Associate/Fellow Member of the Institute of Company Secretaries of India in accordance with the provisions contained in the Company Secretaries Act, 1980, and Regulations made thereunder and declare that I am eligible for the membership of the Institute and am not subject to any disabilities stated in the Act or Regulations of the Institute. The required particulars are furnished below : 1. Name in full ………………......................................................................................................................... (In block letters)
Surname
Name
2. Address: (i) Professional :
.............................................................................................................................. (Designation) .............................................................................................................................. .............................................................................................................................. Tel. No.(s) .................................................... Fax No.............................................. Mobile No.................................................... E-mail Id ............................................
(i) Residential :
.............................................................................................................................. .............................................................................................................................. .............................................................................................................................. Tel. No.(s) .................................................... Fax No..............................................
3. Date of admission as an Associate/…………………..................................................................................... Fellow Member of the Institute 4. Membership Number FCS/ACS .................................................................................................................. 5. I hereby undertake that if re-admitted as an Associate/Fellow Member of the Institute, I will be bound by the Company Secretaries Act, 1980, and the Regulations made thereunder, as amended from time-to-time 6. I also undertake that such instances will not recur and I will make the payment of annual fee in future within the stipulated time (i.e. on or before 30th June of each year). 7. I send herewith a sum of Rs. ................................................... being the arrears of Annual Membership fee of Rs. ..................... for the years .......... to .......... and restoration fee of Rs.250/-. 8. I solemnly declare that what I have stated above is true and correct. Yours faithfully, Place : Date: Signature
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NOVEMBER 2011
r Ou ers mb Me
COMPANY SECRETARIES BENEVOLENT FUND MEMBERS ENROLLED REGIONWISE AS LIFE MEMBERS OF THE COMPANY SECRETARIES BENEVOLENT FUND DURING THE PERIOD 21-09-2011 TO 20-10-2011 REGION
LM NO.
NAME
MEM. NUMBER
CITY
EIRC 1
8368
MR.KAMAL MISHRA
ACS - 19356
HOWRAH
2
8369
MR.NIMESH ANAND
ACS - 27073
RANCHI
3
8375
MR.JYOTIRMOY MISHRA
4
8384
MS. SHILPI KALIKA
ACS - 28587
5
8386
MR.DEBASIS SINHA
ACS - 8058
BURDWAN DISTT
6
8400
MR.V NATARAJAN
ACS - 9961
JAMSHEDPUR
7
8411
MR.RANJEET KUMAR KANODIA
FCS - 5899
KOLKATA
8
8416
MR.SUMANTRA SINHA
ACS - 11247
KOLKATA
9
8362
MR.VIMAL PRAKASH
ACS - 20876
GHAZIABAD
10
8363
MS. ANUSHREE BHARGAVA
ACS - 28727
DELHI
11
8364
MR. ATUL SHARMA
ACS - 22763
DELHI
12
8367
MR.MOHIT KUMAR SINGHAL
13
8371
MR.HARDEV SINGH
ACS - 12503
DELHI
14
8372
MR. ANUJ NIGAM
ACS - 28876
GREATER NOIDA
15
8373
MR. AMIT KUMAR
ACS - 28804
DELHI
16
8374
MR. SUMIT KUMAR GURURANI
ACS - 22421
NEW DELHI
17
8378
MR. SACHIN ARORA
ACS - 23505
NEW DELHI
18
8380
MS. SUMBUL MASOOD
ACS - 24512
ALLAHABAD
19
8381
MR. K VIJAYKUMAR
ACS - 28884
NEW DELHI
20
8385
MS. KANIKA GUPTA
ACS - 24660
AGRA
21
8390
MS. SHWETA GIROTRA
ACS - 14841
DELHI
22
8391
MR.RAJENDRA KUMAR CHOPRA
ACS - 12011
GURGAON
23
8394
MR.CONJEEVARAM SANTHANAM ASHOK KUMAR
24
8395
MS SWATI PATIL
ACS - 20034
NEW DELHI
25
8396
MR.ARUN PRATAP SINGH
ACS - 19623
NOIDA
26
8397
MR.SACHIN AGARWAL
27
8398
MR.ANKIT PODDAR
FCS - 6556
BHUBANESWAR GUWAHATI
NIRC
1686
FCS - 6042
ACS - 5715
MODINAGAR
NOIDA
FCS - 5774
NEW DELHI
ACS - 25443
GHAZIABAD NOVEMBER 2011
28
8399
SH VIPUL SETH
ACS - 20013
MATHURA
29
8401
MR.D SESHADRI
ACS - 15801
DELHI
30
8405
MR.SHIV PAL SINGH KANAUJIYA
ACS - 27374
LUCKNOW
31
8408
MR.VINOD KUMAR
ACS - 27394
DELHI
32
8409
MR. SUDHIR KUMAR ARYA
ACS - 23481
JIND
33
8413
MR.SHASHI KUMAR TANEJA
ACS - 15764
DELHI
34
8414
MR.SHAILESH JAIN
ACS - 19606
BAHADURGARH
35
8415
MR.GAURAV KOHLI
36
8361
MR.AJAY KUMAR RANA
ACS - 27952
CHENNAI
37
8365
MS. B ANUSHA
ACS - 28516
CHENNAI
38
8370
MR. NAVA JYOTH PUTTAPARTHI
ACS - 28843
HYDERABAD
39
8376
MS. MOOKAMBIKA R
ACS - 24423
BANGALORE
40
8379
MS. RAJSHREE CHOUDHARI
ACS - 22498
CHENNAI
41
8382
MR.VIKASH JAIN
FCS - 5230
CHENNAI
42
8383
MR.BASUKI NATH SAH
ACS - 14899
PORTBLAIR
43
8388
MR.PALANIAPPAN NACHIAPPAN
ACS - 18665
CHENNAI
44
8402
MR.M. MANOHARAN
ACS - 18080
CHENNAI
45
8403
MR.K V RAVI SHANKAR
ACS - 25571
BANGALORE
46
8366
MR. SHRINIVAS SUBRAY ADKESAR
ACS - 20908
VERNA
47
8377
MR. SIVAKUMAR SUNMUGAM SUNDARAM
ACS - 22697
MUMBAI
48
8387
MR.RITESH DEEPAK PATEL
ACS - 18035
MUMBAI
49
8389
MS. KAVITA SETHI
FCS - 6008
PUNE
50
8392
MR.SATISH PANDITRAO BHATTU
FCS - 3981
DOMBIVLI (W)
51
8393
MR.JAGDISH RATANLAL AHUJA
ACS - 11103
MUMBAI
52
8404
MR. ANIKET DHANANJAY DEVDHAR
ACS - 21363
NAGPUR
53
8406
MR.VINAY KUMAR TRIPATHI
ACS - 10236
BHOPAL
54
8407
MR.RAJIV NATVARLAL GANDHI
ACS - 11263
MUMBAI
55
8410
MR.AMAL TRIPATHI
ACS - 16912
NAVI MUMBAI
56
8412
MR. MALAY MUKESHBHAI SHAH
ACS - 28281
MUMBAI
FCS - 5006
NEW DELHI
SIRC
WIRC
1687
NOVEMBER 2011
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Congratulations
CS QUIZ
SHRI SUTANU SINHA
Prize query An export promotion council aided by Government of India and registered under section 25 of the Companies Act, 1956 had in terms of its Articles of Association two category of members – registered exporters and member exporters. In terms of the Articles of Association the registered exporters have no voting right. Is this classification which is contrary to the export policy will stand to legal scrutiny? Conditions 1. Answers should not exceed one typed page in double space. 2. Last date for receipt of answer is 8th December, 2011. 3. Two prizes (a first and a second) in kind will be awarded to the best answers and the names of the contributors will be published in the journal. 4. The envelope should be superscribed ‘Prize Query November, 2011 Issue’ and addressed by name to N. K. Jain, Editor, The Institute of Company Secretaries of India, ‘ICSI House’, 22, Institutional Area, Lodi Road, New Delhi-110003.
FCS, Sr. Director (Academics) of The Institute of Company Secretaries of India on his being nominated as Director of Canara Bank. DR. S.N. GHOSH FCS, on his being conferred Ph.D Degree in Commerce by CCS University (formerly Meerut University) on the topic ‘To Evaluate the Role of Securities and Exchange Board of India as Market Regulator for Investors’ Protection’. Attention Members! Members who are yet to get the Identity Cards issued from the Institute are requested to apply for the same by sending a request in writing indicating name, membership No. and date of birth alongwith their latest two coloured passport size photographs (indicating on the reverse the name and membership No.) to the Membership Section of the Institute at 22, ICSI House, Institutional Area, Lodi Road, New Delhi - 110003. For queries, if any, contact on phone no. 011- 4534 1061 or mobile no. 9868128682 or e-mail ids member@icsi.edu and acs@icsi.edu
CORRIGENDUM The membership No. in respect of Mr. Pankaj Kumar was wrongly printed as ACS-10148 instead of FCS-6183 at SL. No. 84 of page No. 1286 of the September 2011 issue of the Chartered Secretary Journal. The error is regretted. Attention Members! 6 (SIX) MONTHS TRAINING WITH FINANCIAL INSTITUTIONS/MANAGEMENT CONSULTANTS/ LAW FIRMS The Council of the Institute has allowed Financial Institutions/Management Consultants/Law firms to impart part of training (6 Months) of the 15 Months training to the Executive/Professional pass students. Accordingly, the students can undergo 6(six) months training with the Financial Institutions/Management Consultants/Law firms which are registered with the Institute for imparting 6(six) months training, on the basis of sponsorship letter issued by the Institute. General Guidelines and the eligibility criteria for the eligible firms are available in the ‘Training’ section on the website. 1688
NOVEMBER 2011